Holding

The SARFAESI Act does not override the Maharashtra Rent Control Act and cannot be used to evict a protected tenant; the two statutes operate in separate fields.

Summary

The appellant, a tenant, challenged the Bank of India's attempt to take possession of a mortgaged premises under the SARFAESI Act after the landlord defaulted on a loan. The Court examined whether Section 35 of the SARFAESI Act, a non obstante clause, could override the Maharashtra Rent Control Act, 1999 and allow the bank to evict a protected tenant. It held that the two statutes operate in distinct fields; the SARFAESI Act cannot be used to defeat the tenant's statutory protection under the Rent Control Act. The Court also clarified that a tenancy, even if not registered, is valid if rent is paid and possession is enjoyed, and such tenancy cannot be displaced by the SARFAESI provisions. Consequently, the bank’s possession order was set aside and the appeals were allowed.

Issues considered

Whether Section 35 of the SARFAESI Act overrides the Maharashtra Rent Control Act, 1999.
Whether a 'protected tenant' under the Rent Control Act can be treated as a lessee and be evicted under the SARFAESI Act.
Scope of the non obstante clause in the SARFAESI Act with respect to laws in different fields.
Whether an unregistered lease creates a valid tenancy protected by the Rent Control Act.
Whether the SARFAESI Act can be invoked to bypass the procedural safeguards of rent control legislation.

Legislation cited

Constitution of Indias. Article 245, s. Article 246(2), s. Article 254
Maharashtra Rent Control Act, 1999s. 15, s. 55(2)
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002s. 13(2), s. 13(4), s. 14, s. 17, s. 35
Transfer of Property Act, 1882s. 105, s. 106, s. 65A, s. 69, s. 69A

Subjects

SARFAESI ActRent Control Actprotected tenantevictionnon-performing assetsSection 35lease validityTransfer of Property Actfederalismres judicatatenancy rights

Judgment

[2016] 1 S.C.R. 419

VISHAL N. KALSARIA A
v.
BANK OF INDIA & ORS.
(Criminal Appeal No. 52 of2016 etc.)
JANUARY 20, 2016 B

[V. GOPALA GOWDA AND AMITAVA ROY, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act. 2002 - s. 35 - Scope of -
Whether the SARFAESI Act, by virtue of s. 35 thereof. would override c
the provisions of the Maharashtra Rent control Act, 1999 - Held:
SARFAESI Act cannot mean to extend to each and every law enacted
by the Central and State legislature - It can extend only to the laws
operating in the same field- The SARFAESI Act and the Rent Control
Act, both operate in different fields - A tenant cannot be evicted
under the provisions of SARFAESI Act as the same would amount to D
stultifying the statutory rights of the tenant provided under the Rent
Control Act - A landlord cannot be permitted to do through the
SARFAESI Act, what he has been barred to do under the Rent Control
Act - Thus, the provisions of the SARFAESI Act cannot be used to
override the provisions of the Rent Control Act - Maharashtra Rent
E
Control Act, 1999.
Maharashtra Rent Control Act, 1999 - 'Protected tenant'
under the Act - Whether can be treated as 'lessee' - Held: If the two
parties are executing their rights and liabilities in the nature of a
landlord-tenant relationship, and if regular rent is being paid and
F
accepted, mere non-registration of the tenancy deed will not make
the lease nugatory.
Judgment - Interpretation of - Held: In order to construe
ratio decidendi of a judgment, a word or sentence cannot be picked
up - A judgment cannot be read as a statute and interpreted and
G
applied to fact situations.
Allowing the appeals, the Court
HELD: 1.1 The Securitisation and Reconstruction of
Financial Assets and enforcement of Security Interest Act, 2002
is meant to operate as a tool for banks and ensures a smooth H
419
420 SUPREME COURT REPORTS [2016] I S.C.R.

A debt recovery process. The object behind the enactment of
Maharashtra Rent Control Act, 1999, is to control and regulate
the ra1·e of rent so that unnecessary hardship is not caused to
the tenant, and also to provide protection to the tenants against
arbitrary and unreasonable evictions from the possession of the
property. Thus, both the Acts are meant to operate in completely
B
different spheres. [Paras 10, 22 and 23) [436-A) [437-E] [427-G)
Transcore v. Union of India & Anr. (2008) 1 SCC
125: 2006 (9) Suppl. SCR 785 - relied on.
Miss Santosh Mehta v. Om Prakash & Ors. (1980) 3
c SCC 610:1980 (3) SCR 325 - referred to.
1.2 In the present case, there is an interest of the bank in
recovering the Non· Performing Asset on the one hand, and
protecting the right of the blameless tenant on the other. The
Rent Control Act being al- social welfare legislation, mus·t be
D construed as such. A landlord cannot be permitted to do
indirectly, what he has been barred from doing nnder the Rent
Control Act, more so when the two legislations, that is the
SARFAESI Act and the Rent Control Act operate in completely
different fields. The provisions of the SARFAESI Act cannot be
used to override the provisions of the Rent Control Act.
E [Para 24] [438-1)-D]

1.3 If it is held that the provisions of SARFAESI Act
override the provisions of the various Rent Control Acts to allow
a Bank to evict a tenant from the tenanted premise, which has
become Jl secured asset of the Ban'k after the default on loan by
F the landlord and dispense with the procedure laid down under
the provisions of the various Rent Control Acts and the law
laid down by this Court then the legislative powers of the
state legislatures are denuded which would amount to subverting
the law enacted by the State Legislature. Such interpretation would
G
not only tantamount to violation of rule of law, .butwould also
render a valid Rent Control statute enacted by the State
Legislature in exercise of its legislative power under Article
246 (2) of the Constitution of India useless and nugatory. The
Constitution of India envisages a federal feature, which has
been held to be a basic feature of the Constitution. Such a
H
VISHAL N. KALSAR!A v. BANK OF !NOIA & ORS. 421

situation was uot contemplated by the Parliament while A
enacting the SARFAESI Act and therefore the interpretation
sought to be made by the Banks cannot be accepted by this
Court as the same is wholly untenable in law. [Paras 31 and 32]
[444-D-E; 445-D-F]
S.R. Bommai & Ors. v. Union of India (1994) 3 SCC 1 B
:1994 (2) SCR 644 - followed.
Harshad Govardhan Sondagar v. International Assets
Reconstruction Co. Ltd. & Ors. (2014) 6 SCC 1;
Jshwari Khetan Sugar Mills Pvt. Ltd. & Ors. 1' St at e
of Uttar Pradesh & Ors. (1980) 4 SCC 136.: 1980 (3)
SCR 331; Bhanu Kumar Jain v. Arehano Kumar & C
Anr. (2005) 1 SCC 787: 2004 (6) Suppl. SCR 1104 -
referred to.
1.4 It is a settled position of law that once tenancy is
created, a tenant can be evicted only after following the due
process of law, as prescribed under the provisions of the Rent D
Control Act. A tenant cannot be arbitrarily evicted by using
the provisions of the SARFAESI Act as t.hat would amount to
stultifying the statutory rights of protection given to the tenant.
A non obstante clause (Section 35 of the SARFAESI Act) cannot
be used to bulldoze the statutory rights vested on the tenants
under the Rent Control Act. The expression 'any other law for E
the time being in force' as appearing in Section 35 of the
SARFAESI Act cannot mean to extend to each and every law
enacted by the Central and State legislatures. It can only extend
to the laws op"rating in the same field. [Para 30] [442-D-E]
Central Bank of India v. State ()(Kera/a & Ors. (2009) F
4 SCC 94 (10): 2009 (3) SCR 735 - relied on.
1.5 The decision of this Court .rendered in the case of
Harsltad Govardltan Sondagar case cannot be understood to have
held that the provisions of the SARFAESI Act override the
provisions of the Rent Control Act, and that the Banks are at G
liberty to evict the tenants residing in the tenanted premises
which have been offered as collateral securities for loans on
which- default has been done by the debtor/landhird. A w~rd or
sentence cannot be picked up from a judgment to construe that
it is the ratio decidendi on the relevant aspect of the case. It is H
422 SCPREME COURT REPORTS [2016] 1 S.C.R.

A also a well settled position of law that a judgment cannot be read
as a statute and interpreted and applied to fact situations.
(Paras 27 and 28][440-C; 441-H; 442-A]
H.H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia
Bahadur of Gwalior & Ors. v. Union of India (1971) 1 SCC
B 85: 1971 (3) SCR 9 - followed.
Co111111issio11er of I11co111e Tax v. Sun E11gi11eering Works
(P.) Ltd. (1992) 4 SCC 363: 1992 (1) Suppl. SCR 732; U11ion of
India v. Dhanawanti Devi & Ors. (1996) 6 SCC 44:1996 (5) Suppl.
SCR 32 - relied on.
c 2. According to Section 106 of the Transfer of Property
Act, 1882, a monthly tenancy shall be deemed to be a tenancy
from month to month and must be registered if it is reduced
into writing. The Transfer of Property Act, however, remains
silent on the position of law in cases where the agreement is not
D reduced into writing. If the two parties are executing their rights
and liabilities in the nature of a landlord-te~ant relationship and
if regular rent is being paid and accepted, then the mere
factum of non-registration of deed will not make the lease itself
nugatory. If no written lease \)eed exists, then such tenants
are required to prove that they have been in occupation of the
E premises as tenants by producing such evidence in the
proceedings under Section 14 of the SARFAESI Act. Further, in
terms of Section 55(2) of the special law in the instant case, which
is the Rent Control Act, the onus to get such a deed registered
is on the landlord. In light of the same, neither the landlord nor
F the banks can be permitted to exploit the fact of non registration
of the tenancy deed against the tenant. [Para 25]( 438-H; 439-A-
C-]
Anthony v. K.C. lttoop & Sons & Ors. c2000J 6 sec
394: 2000 (1) Suppl. SCR 645 - relied on.
G Case Law Reference
(2014) 6 sec 1 referred to. Paras
2000 (1) Suppl. SCR 645 referred to. Para 13
1980 (3) SCR 331 referred to. Para 16
H 2004 (6) Suppl. SCR 1104 referred to. Para 19
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 423

2006 (9) Suppl. SCR 785 relied on. Para 22 A
1980 (3) SCR 325 relied on. Para 22
1971 (3) SCR 9 relied on. Para 27
1992 (1) Suppl. SCR 732 followed. Para 27
1996 (5) Suppl. SCR 32 relied on. Para 27 B

2009 (3) SCR 735 relied on. Para 30
1994 (2) SCR 644 followed. Para 31
CRlM!NALAPPELLATE JURISDICTION: Criminal Appeal No.
S2of2016 C
From the Judgment and Order dated 29.11.2014 of the Chief
Metropolitan Magistrate, Esplanade, Mumbai in M.A. No. 12Jof2011
in Case No. 237/MA/2010
WITH
D
Cr!. A. Nos. S3, S4, SS, S6, S7, SS, S9, 62, 63 and 64of2016, C. A.
Nos. 414-41S,469, 417, 419, 420, 421, 422 of2016, Cr!. A. Nos. 7S3 and
7S4of2014
BasavaPrabhu S. Patil, Nikhil Goel, Naveen Goel, Purvish Jitendra
Malkan, Dharita P. Malkan, Garvesh Kabra, H. C. Kharbanda, Anurag E
Kishore, Adarsh Upadhyay, Pramod B. Agarwala for the Appellant.
Dhruv Mehta, Amarendra Sharan, Vikas Singh, Shyain Diwan,
Sr. Advs., Sameer Abhyankar, Sona! Jain, Ms. Heena Sharma, Amar
Dave Krishnayan Sen, AnkitJain, Kuna I Chatterji, Anil Kumar Sangal,
Siddharth Sangal, M. T. George, M. G. Yogamaya, Sanjay Kapur, Anmol F
Chandan, Ms. Priyanka Das, 0. P. Gaggar, Aditya Gaggar, Rajeev K.
Pandey, Rajeev Maheshwaranand Roy, Kuna! A. Cheema, Nishant
Katneshwarkar for the Respondents.
The Judgment of the Court was delivered by
V. GOPALA GOWDA, J. l. The applications for impleadment G
are allow~d.
2. Leave granted in all the special leave petitions.
3. In the present batch ofappeals, the broad point which requires
our attention and consideration is whether a 'protected tenant' under·
H
424 SUPREME COURT REPORTS [20 I 6) I S.C.R.

A The Maharashtra Rent Control Act, I 999 (in short the 'Rent Control
Act') can be treated as a lessee, and whether the provisions of The
Securltisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (in short, the 'SARFAESI Act') will
override the provisions of the Rent Control Act. How can the right of
the 'protected tenant' be preserved in cases where the debtor-landlord
B
secures a loan by offering the very same property as a security interest
either to Banks or Financial Institutions, is also the essential legal question
to be decided by us.
4. In all the appeals, the same question of law would arise for
consideration. For the sake of convenience and brevity, we would refer
c to the relevant facts from the appeal arising out ofS.L.P.(Crl.) No.8060
of20!5, which has been filed against the impugned judgment and order
dated 29.11.2014 in M.A.No. 123 of201 I in Case No.237 of2010 passed
by the learned Chief Metropolitan Magistrate, Esplanade, Mumbai,
wherein the application of the appellant herein for impleadment as
D intervenor as well as stay of the order dated 08.04.20 I I passed in Case
No.237 of2010 by the learned Magistrate, Esplanade, Mumbai, was
dismissed.
5. Respondent Nos. 4 and 5 had approached the Bank of India
(Respondent No. I) (in short "the respondent Bank") for a financial loan,
E which was granted against equitable mortgage of several properties
belonging to them, including the property in which the appellant is allegedly
a tenant. The respondent nos. 4 and 5 failed to pay the dues with in the
stipulated time and thus, in terms of the SARFAESI Act, their account
became a non-performing asset On 12.03.2010, the respondent-Bank
served on them notice under Section 13(2) ofSARFAESI Act. On failure
F of the respondents to clear the dues from the loan amount borrowed by
the above respondent nos. 4 and 5 within the stipulated statutory period
of 60 days, the respondent-Bank filed an application before the Chief
Metropolitan Magistrate, Mumbai under Section 14 of the SARFAESI
Act for seeking possession of the mortgaged properties which are in
G actual possession of the Appellant. The learned Chief Metropolitan
Magistrate allowed the application filed by the respondent-Bank vide
order dated 08.04.20 I I and directed the Assistant Registrar, Borivali
Centre of Courts to take possession of the secured assets. On 26.05.2011,
the respondent no.4 served a notice on the appellant, asking him to vacate
the premises in which he was residing within 12 days from the receipt of
H
VISHAL N. KALSARIA v. BANK OF INDIA &.ORS. 425
[V. GOPALA GOWDA, J.]

the notice. The appellant fearing eviction, filed a Rent Suit R.A.D. Suit A
No. 913 of201 l before the Court of Small Causes, Bombay. Vide order
datect'08.06.2011,.the Small Causes Court allowed the application and
passed an ad interim order of injunction in favour of the appellant,
restraining respondent no.4 from obstructing the possession of the
appellant over the suit premises during the pendency of the suit. In view
B
of the order dated 08.06.2011, the appellant then filed an application as
an intervenor to stay the execution ofthe order dated 08.04.2011 passed
by the Chief Metropolitan Magistrate. The learned Chief Metropolitan
Magistrate vide order dated 29.11.2014 dismissed the application filed
by the appellant by placing reliance on a judgment of this Court rendered
in the case of Harslu1d Govard/um Sondagar v. International Assets c
Reconstruction Co. Ltd. & Ors. 1• Dismissing the application, the learned
judge held as under: · ··
"3 .... the Hon'ble Supreme Court has held that the alleged tenant
has to produce proofofexecution of a registered instrument in his
favour by the lessor. Where he does not produce proof of execution D
of a registered instrument in his favour and instead relies on an
unregistered instrument or oral agreement accompanied by delivery
of possession, the Chief Metropolitan Magistrate or the District
Magistrate, as the case may be, will have to come to the conclusion
that he is not entitled to the possession of the secured asset for
more than a year from the date of the instrument or from the date E
of delivery of possession in his favour by the landlord.
4. It is to be highlighted that the intervener did not place on record
any registered instrument to fulcrum his contention. So, in view of
the raJio laid down in Harshad Sondagar's case (cited supra), I
hold that the intervener is not entitled to any protection under the F
law."
'·. 6. The learned Chief Metropolitan Magistrate further held that
when the secured creditor takes action under Section 13 or 14 of the
SARFAESI Act to recover the possession of the secured interest and
recover the loan amount by selling the same in public auction, then it is G
not open for the Court to grant an injunction under Section 33 of the
Rent Control Act. The learned Chief Metropolitan Magistrate further
held thatt~e order dated 08.06.2011 passed by the Small Causes Court,
Mumbai cannot be said to be binding upon the respondent-Bank, especially
1
(2014) 6 sec 1 H
426 SUPREME COURT REPORTS (2016] I S .C.R.

A in the light of the fact that it was not a party to the proceedings. Hence
the present appeal filed by the appellant.
7. We have heard the learned counsel for both the parties.
8. Before we consider the submissions advanced by the learned
counsel appearing on behalf of the parties, it is essential to first appreciate
B the provisions of law in question.
9. The Maharashtra Rent Control Act, 1999, which repealed the
Bombay Rent Act, 194 7 was enacted by the state legislature of
Maharashtra under Entry 18 of List II of the Seventh Schedule of the
Constitution of India to consolidate and unify the different provisions
C · and legislations in the State which existed pertaining to rent and the
landlord-tenant relationship. The Statement of objects and reasons of
the Rent Control Act reads, inter a/ia, as under:
"I. ..... At present, there are three different rent control laws,
which are in operation in this State ...... All these three laws have
D different provisions and the courts or authorities which have the
jurisdiction to decide matters arising out of these laws are also not
uniform. The Procedures under all the three laws are also different
in many of the material aspect.
2. Many features of the rent control laws have outlived their utility.
E The task, therefore, of unifying, consolidating and amending the
rent control laws in the State and to bring the rent control legislation
in tune with the changed circumstances now, had been engaging
the attention of the Government. .....
3. In the meantime, the Central Government announced the
F national housing policy which recommends, inter alia, to carry out
suitable amendments to the existing rent control laws for creating
and enabling involvement in housing activity and for guaranteeing
access to shelter for the poor. The National Housing Policy further
recognized the important role of rental housing in urban areas in
different income groups and low-income households in particular
G
who cannot afford ownership house. The existing rent control
legislation has resulted in a freeze of rent, very low returns in
investment and difficulty in resuming possession and has adversely
affected investment in rental housing and cause deterioration of
the rental housing stock."
H
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 427
[V. GOPALA GOWDA, J.]

On the other hand, the SARFAESI Act was enacted by the A
Parliament with a view to regulate the securitisatio11 and
reconstruction of financial assets and enforcement of security
interests against the debtor by securing the possession of such secured
assets and recover the loan amount due to the Banks and Financial
Institutions. The statement of objects and reasons of the SARFAESI
B
Act reads as under:
'The financial sector has been one of the key drivers in India's
efforts to achieve success in rapidly developing its economy. While
banking industry in India is progressively complying with the
international prudential norms and accounting practices, there are
certain areas in which the banking and financial sector do not
c
have a level playing field as compared to other participants in the
financial markets in the world. There is no legal provision for
facilitating.Securitisation of financial assets of banks and financial
institutions. Fmther, unlike international banks, the banks and
financial institutions in India do not have power to take possession D
of securities and sell them. Our existing legal framework relating
to commei·cial transactions has not kept pace with the changing
commercial practices and financial sector reforms. This has
resulted in slow pace ofrecovery of defaulting loans and mounting
levels of non-performing assets of banks and financial institutions.
E
Narasimham Committee I and II and Andhyaruj ina Committee
constituted by the Central Government for the purpose of
examining banking sector reforms have considered the need for
changes in the legal system in respect of these areas."
(emphasis laid by this Court)
F
I 0. The SARFAESI Act enacted under List I of the Constitution
of India thus, seeks to regulate asset recovery by the Banks. It becomes
clear from a perusal of the Statements of Objects and Reasons of the
Rent Control Act and the SARFAESI Act that the two Acts are meant
to operate in completely different spheres. So far as residential tenancy
rights are concerned, they are governed by the provisions of the Rent G
Control Act which occupies the field on the subject.
I 1. The controversy in the instant case arises squarely out of the
interpretation of a decision of this Court in the case of Harsluul
Govar<llia11 So111/11g11r (supra). The fact situation facing the court in
H
428 SUPREME COURT REPORTS [2016] 1 S.C.R.

A that case was similar to the one in the instant case. The premises which
the appellants therein claimed to be the tenants of had been mortgaged
to different banks as collateral security to such borrowed amount by the
landlord/debtor. On default of payment of the borrowed amount by the
landlords/debtors, the banks made application under Section 14( I) of the
SARFAESI Act to the Chief Metropolitan Magistrate, praying that the
B
possession of the premises be handed over to them in accordance with
the provisions of the SARFAESI Act. This Court in the case of Harsluu/
Govardlwn Sondagar (supra) held as under:
"34 ...... In our view, therefore, the High Court has not properly
appreciated the judgment of this Court in Transcore (supra) and
c has lost sight 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 enforced, without the intervention of the court or
D tribunal, by such creditor in accordance with the provisions of the
Act. The High Court has failed to appreciate that the provisions
of Section 13 of the SARFAESI Act thus override the provisions
of Section 69 or Section 69 A 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
E receipt of a notice under sub-Section (2) of Section 13 of the
SARFAESI Act by a borrower. Hence, the view taken by the
Bombay High Court in the impugned judgment 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
F prior to the creation of mortgage or after the creafron 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."
(emphasis laid by this Court)
G 12. Mr. Pallav Shishodia, the learned senior counsel appearing on
behalf of the appellant in the appeal @ out of S.L.P. (C) No. 8060 of
2015 places reliance on the decision of th is Court in Harslwd Govan//wn
Sondagar (supra), to contend that prior tenancy in respect of the
mortgaged property to the Bank is protected in terms of the Rent Control
Act. The relevant paragraphs of the decision are quoted as under:
H
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 429
[V. GOPALA GOWDA, J.]

"25. The opening words of sub-section (I) of Section 14 of the A
SARFAESI Act also provides that 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 take the
assistance of the Chief Metropolitan Magistrate or the District
Magistrate. Where, therefore, such a request is made by the
B
secured creditor and the Chief Metropolitan Magistrate or the
District Magistrate finds that the secured asset is in possession of
a lessee but the lease under which the lessee claims to be in
possession of the secured asset stands determined in accordance
with 4 Section 111 of the Transfer of Property Act, the Chief
Metropolitan Magistrate or the District Magistrate may pass an c
order for delivery of possession of secured asset in favour 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 SARFAESl Act provides that any transfer
of secured asset after taking possession of secured asset by the
D
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
secured asset under sub-section (6) of Section 13 of the
SARFAESI Act, unless it has been effected after the secured E
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 Magistrate for
taking possession of a secured asset from the lessee where the 4
F
lease stands determined by any of the modes mentioned in Section
111 of the Transfer of Property Act.
32. When we read sub-section (I) of Section 17 of the 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 G
authorised officer under the Chapter, may apply to the Debts
Recovery Tribunal _havingjurisdiction in the matter within 45 days
from the date on which such measures had been taken. We agree
wit~_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 H
430 SUPREME COURT REPORTS [2016] I S.C.R.

A that within 45 days from the date on which a possession notice is
delivered or affixed or published under sub-rules (I) 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 subsection
B
(3) of Section 17 of the SARFAESI Act, we find that the Debts
Recovery Tribunal has powers to restore 5 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 in sub-section
c (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 mortgage or the lease though
D
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 to restore possession of the secured asset to the lessee.
E In our considered opinion, therefore, there is no remedy available
under Section 17 of the SA RFAES I Act to the lessee to protect
his lawful possession under a valid lease."
13. The learn~d senior counsel contends that it is a settled position
of law that in the absence of a valid document of lease for more than
F one year or in case of an invalid lease deed, the relation of tenancy
between a landlord and the tenant is still created due to delivery of
possession to the tenant and payment of rent to the landlord-owner and
such tenancy is deemed to be a tenancy from month to month in respect
of such property. The learned senior counsel further places reliance on
a three Judge Bench decision of this Court in Anthony v. K,C. lttoop &
G Sons & Ors,1, wherein it was held as under:
" .... so far as the instrument of lease is concerned there is no
scope for holding that appellant is a lessee by virtue of the said

H '(2000J 6 sec 394
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 431
[V. GOPALA GOWDA, J.]

instrument. The court is disabled from using the instrument as A
evidence ...
But this above finding does not exhaust the scope of the issue
whether appellant is a lessee of the building. A lease of immovable
property is defined in Section 105 of the TP Act. A transfer of a
right to enjoy a property in consideration of a price paid or promised B
to be rendered periodically or on specified occasions is the basic
fabric for a v.alid lease. The provision says that such a transfer
can be made expressly or by implication. Once there is such a
transfer of right to enjoy the property a lease stands created.
What is mentioned in the three paragraphs of the first pa11 of
Section I 07 of the TP Act are only the different modes of how
c
lea£es are created .... Thus, de hors the instrument parties can
create a lease as envisaged in the second paragraph of Section
107 which reads thus:
All other leases of immovable property may be made either by a
registered instrument or by oral agreement accompanied by D
delivery of possession.
When lease is a transfer of a right to enjoy the property and such
transfer can be made expressly· or by implication. the mere fact
that an unregistered instrument came' into existence would not
stand in the way of the court to determine whether there was in E
fact a lease otherwise than through such deed."
· (emphasis laid by this Court)
14. The learned senior counsel further contends that where a
lease deed or document of tenancy in respect of the property in question
F
is for a period exceeding one year, but such document has not been
registered, then, by virtue of payment ofrent, the relationship of tenancy
between a landlord and the tenant comes into existence and in such
cases, the tenant must be deemed to be a tenant from month to month
and the same would amount to a tenancy from month to month. Thus, in
the instant case, the tenancy of the appellants in respect of the property G
in question which is the secured asset of the Bank being from month to
month would also be protected under the provisions of the Rent Control
Act.
15. The learned senior counsel further contends that according to
the decision of this Court in the case of ll11rs/1111/ Gov11rd/11111 Sont/11g11r H
432 SUPREME COURT REPORTS (2016] 1 S.C.R.

A (supra), if a person claiming to be a tenant or lessee either produces a
registered agreement or relies on an oral agreement accompanied by
delive1y of possession, then such tenancy/possession of the property
with the appellant as tenant needs to be protected. It is further contended
that the Harshad Govardlwn Sondagar (supra) has clearly held that
the tenancy claims of the tenants are to be decided by the Chief
B
Metropolitan Magistrate in accordance with any other law that may be
relevant after giving an opportunity of hearing to the persons who claim
tenancy in respect of such property. The term ""any other law that may
be relevant" clearly indicates a reference to the State Rent Protection
laws, which in the case at hand is the Rent Control Act. Thus, the
c protection of the State Rent Control legislation is also to be considered
by the learned magistrate while deciding an application filed by the Bank
under Section 14 of the SARFAESl Act.
16. On the other hand, Mr. Amarendra Sharan, learned senior
counsel appearing on behalf of the respondents in Crl.A.@ S.L.P. (Crl)
D Nos. 6941, 6944 and 6945 of2015 contends thatthe pith and substance
of the central enactment in the instant case, which is the SARFAESI
Act needs to be apprecia1;ed. Proper implementation of the provisions of
the SARFAESI Act is in the larger interest of the nation. The learned
senior counsel places reliance on a Constitution Bench decision of this
Court in the case of Is/1wari Khetan Sul(ar Mills Pvt. Lttl. & Ors. v.
E State a/ Uttar Pradesh & Ors.·', wherein it was held as under:
"13. If in pith and substance a legislation falls within one entry or
the other but some portion of the subject-matterofthe legislation
incidentally trenches upon and might enter a field under another
List, the Act as a whole would be valid notwithstanding such
F incidental trenching. "J:his is well established by a catena of
decisions [see Union of India v. HS. Dhillon and Kera/a State
Electricity Board v. Indian Aluminium Co.] After referring to
these decisions in State of Karnutaka v. Ranganatha Reddy
and Am: Untwalia, J. speaking for the Constitution Bench has in
G terms stated that the pith and substance of the Act has to be
looked into and an incidental trespass would not invalidate the
law. The challenge in that case was to the Nationalisation of
contract carriages by theKarnataka State, inter alia, on the ground
that the statute was invalid as it was a legislation on the subject of

H ;<1980J 4 sec 136
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 433
[V. GOPALA GOWDA, J.]

interstate trade and commerce. Repelling this contention the Court A
unanimously held that in pith and substance the impugned legislation
was for acquisition of contract carriages and not an Act which
deals with inter-State trade and commerce."
17. The learned senior counsel further contends that the
SARFAESI Act was enacted by the Parliament under Entry 45 of List I B
of the Constitution oflndia. lt is a special Act with a special purpose and
procedure laid down for the recovery of the secured asset of the debtor
by the Bank to recover the amount due to it, and thus, any encroachment
upon this Act should not be permitted, a:s it would defeat the laudable
object of the Act, which has been enacted keeping in view the larger
public interest.
c
· "'t 8. Mr. Vikas Singh, the learned senior counsel appearing on behalf
ofthe respondent State Bank oflndia in the appeal arising out of S.L.P.
(C) No. 28040 of 2015 contends that the SARFAESI Act cannot be
allowed to fail at the hands of the present appellants, who have no
registe"red instrument of lease. D

19. The learned senior counsel further contends that in light of the
decision of this. Court in the case of H"rsliad Gov{lr<flum So1u/ag{lr
(supra), the present case is barred by resjudicata. He places reliance on
the three Judge Bench decision of this Court in the case of Blumu
Kum"r J"in v. Arclwmt Kum"r & Anr.4, wherein it was held as under:
"It is now well-settled that principles of res judicata applies in
~ifferent stages of the same proceedings.

19. In Y.B. Patil (supra) it was held:
"4 ... It is well settled that principles of res judicata can be F
. invoked not only in separate subsequent proceedings, they also
get attracted in subsequent stage of the same procee_dings.
Once an order made in the course of a proceeding becomes
final, it would be binding at the subsequent state of that
proceeding ..."
G
20. In Vijayabai (supra), it was held:
"13. We find in the present case the Tahsildar reopened the
very question which finally stood concluded, viz., whether
Respondent 1 was or was not.the tenant of the suit land. He
• (2005) 1 sec 787 H
434 SUPREME COURT REPORTS [2016] 1 S.C.R.

A fu11her erroneously entered into a new premise of reopening
the question of validity of the compromise which could have
been in issue if at all in appeal or revision by holding that
compromise was arrived at under pressure and allurement.
How can this question be up for determination when this
became final under this very same statute? ... "
B
21. Yet again in Hope Plantations Ltd. (supra), this Court laid
down the law in the following terms:
"17 ... One important consideration of public policy is that the
decisions pronounced by courts of competent jurisdiction should
c be final, unless they are modified or reversed by appellate
authorities; and the other principle is that no one should be made
to face the same kind of litigation twice over, because such a
process would be contrary to considerations of fair play and
justice."

D 20. Mr. M.T. George, the learned counsel appearing on behalf of
the Bank in the appeal arising out of S.L.P. (C) No. 12772 of 2015
contends that the tenancy has not been determined conclusively, as the
documents produced on record to prove the relationship of tenancy are
not registered and do not hold much water. Mr. Rajeev Kumar Pandey,
the learned counsel appearing on behalf of the respondent Bank in the
E appeal arising out of S.L.P. (C) No. 31080 of 2015 submits that the
property in question was mortgaged before it was leased. Such a lease
would thus, not entitle the lessee to stop the bank from taking possession
over the property which was mortgaged to it.
21. The other learned counsel appearing on behalf of other Banks
F in the connected appeals adopted the arguments advanced by the
aforesaid learned senior counsel appearing on behalf of some of the
Banks. It was also contended thatthe appellants in the connected appeals
have not been able to produce sufficient documentary evidence to prove
that they are tenants in respect of the properties in question in the
G proceedings under Section 14 of the SAR FA ES I Act and hence, they
have no locus standi to prefer the above appeals questioning the
correctness of the Order passed by the learned Magistrate.
We have carefully considered the above rival legal submissions
made on behalf of the parties and answer the same as hereunder:
H
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 435
[Y. GOPALA GOWDA. J.]

22. The SARFAESI Act which came into force from 21.06.2002. A
was enacted to p.rovide procedures to the Banks to recover their security
interest from the debtors and their collateral security assets as provided
under the provisions of the Act. The scope of the Act was explained by
this Court in the case of Trauscore 1: U11io11of11ulia & Aur.' as under:
'' 12. The N PA Act. 2002 is enacted to regulate securitization and B
reconstruction of financial assets and enforcen1ent of security
interest and for matters connected therewith. The NPA Act
enables the banks and Fis to realize long-term assets. manage
problems of liquidity. asset-liability mismatch and to improve
recovery of debts by exercising powers to take possession of
securities. sell them and thereby reduce non-performing assets
c
by adopting measures for recovery and reconstruction. The NPA
Act further provides for setting up of asset reconstruction
companies which are empowered to take possession of secured
assets of the borrower including the right to transfer by way of
lease: assignment or sale. The said Act also empowers the said D
asset reconstruction con1panies to take over the 111anage111ent of
the business of the borrower....
13. Non-performing assets (NPA) are a cost to the economy.
When the Act w-as enacted in 2002. the NPA stood at Rs I. I 0
lakh crores. This was a drag on the economy. Basically, NPA is E
an account which becomes non-viable and non-performing in terms
of the guidelines given by RBI. As stated in the Statement of
Objects and Reasons. NPA arises on account of mismatch
between asset and liability. The NPA account is an asset in the
hands of the ba1ik or Fl. It represents an amount receivable and
realizable by the bai1ks or Fis. In that sense, it is an asset in the F
hands of the secured creditor. Therefore, the NPA Act. 2002was
primarily enacted to reduce the non-performing assets by adopting
measures not only for recovery but also for reconstruction .
. Therefore. the Act provides for setting up of asset reconstruction
·- companies, special purpose vehicles, asset management G
compmJies. etc. which are empowered to take possession of
secured assets of the borrower including the right to transfer by
way of lease, assignment or sale. It also provides for realizati.on

'(2008J 1sec12; H
436 SUPREME COURT REPORTS [2016] I S.C.R.

A of the secured assets. It also provides for takeover of the
management of the borrower company."
Thus, it becomes clear that the SARFAESI Act is meant to operate
as a tool for banks and ensures a smooth debt recovery process. The
provisions of SARFAESI Act make its purport amply clear, specifically
B under the provisions of Sections 13(2) and 13( 4) of the Act, which read
as under:
"13. Enforcement of Security interest.-
(2) Where any borrower, who is under a liability to a secured
creditor under a security agreement, makes any default in
c repayment of secured debt or any instalment thereof, and his
account in respect of such debt is classified by the secured creditor
as non-performing asset, then, the secured creditor may require
the borrower by notice in writing to discharge in full his liabilities
to the secured creditor within sixty days from the date of notice
D failing which the secured creditor shall be entitled to exercise all
or any of the rights under sub-section (4).
"(4) In case the borrower fails to discharge his liability in full
within the period speci-fied in sub-section (2), the secured creditor
may take recourse to one or more of the following measures to
E recover his secured debt, namely:-
(a) take possession of the secured assets of the borrower including
the right to transfer by way oflease, assignment or sale for realising
the secured asset .... "
Fu11her, the provision under Section 35 of the SARFAESI Act
F provides that it shall override all other laws, which is quoted as hereunder:
"35. The provisions of this Act to override other laws.- The
provisions of this Act shall have effect, notwithstanding anything
inconsistent therewith contained in any other law for the time
being in force or any instrument having effect by virtue of any
G such law."
Providing a smooth and efficient recovery procedure to enable
the banks to recover the Non Performing Assets is a laudable object
indeed, which needs to be ensured for the development of the economy
of the Country. What has complicated the matters, however, is the clash
H of this laudable object with another laudable object, namely, to secure
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 437
[Y. GOPALA GOWDA, J.]

the rights of the tenants unclerthe various Rent Control Acts. The history A
of these Rent Control Acts can be traced to as far back-as the Second
World War. At that time, due to the massive inflation and shortage of
commodities, not only had the cost ofliving risen exponentially, the tenants
were also often left to the mercy of the landlords as far as evictions or
prices of rent were concerned. Rent Control Acts have been enacted by
B
the different state legislatures to secure the rights of the weaker sections
of the society, viz., the tenants. Justice Krishna Iyer aptly observed in
the case of Miss S11ntosh Meltta '" Om Prakash & Ors.':
· "2. Rent Control laws are basically designed to protect tenants
because scarcity of accommodatio1\ is a nightmare for those who
own none and if evicted, will be helpless."
c
23. The preamble of the Rent Control Act reads as under:
"An Actto unify, consolidate and amend the law relating to the
control of rent and repairs of certain premises and of eviction
and for encouraging the construction of new houses by assuring D
a fair return on the investment by landlords and to provide for
the matters connected with the purposes aforesaid ...... "
It becomes clear from a perusal of the preamble of the Act that
the ultimate object behind the enactment of this legislation is to control
and regulate the rate of rent' so that unnecessary hardship is not caused E
to the tenant, and also to provide protection to the tenants against arbitrary
and unreasonable evictions from the possession of the property. The
protection of the tenants against unjust evictions becomes even more
pronounced when examined in the light of Section 15 of the Rent Control
Act, which reads as under:
F
"15. No ejectment ordinarily to be made if tenant pays or is
ready and. willing to pay standard rent and permitted
increases.(!) A landlord shall not be entitled to the recovery of
possession of any premises so long as the tenant pays, or is ready
and willing to pay, the amount of the, standard rent and permitted
increases, if any, and observes and performs the other conditions G
of the tenancy, in so far as they are consistent with the provisions
of this Act."

''(1980)3 SCC610 H
438 SUPREME COURT REPORTS [2016] I S.C.R.

A Section 15, thus, restricts the right" of a landlord to recover
possession of the tenanted premises from a tenant.
24. When we understand the factual matrix in the backdrop of
tlie objectives of the above two legislations, the controversy in the instant
case assu1nes i1111nense significance. There is an interest of the bank in
B recovering the Non Performing Asset on the one hand, and protecting
the right of the blameless tenant on the other. The Rent Control Act
being a social welfare legislation, must be construed as such. A landlord
cannot be permitted to do indirectly what he has been barred from doing
under the Rent Control Act, 1ilore so when the two legislations, that is
the SARFAESI Act and the Rent Control Act operate in completely
c different fields. While SARFAESI Act is concerned with Non Performing
Assets of the Banks, the Rent Control Act governs the relationship
between a tenant and the landlord and specifies the rights and Iiabi lities
of each as well as the rules of ejectment with respect to such tenants.
The provisions of the SARFAESI Act cannot be used to override the
D provisions of the Rent Control Act. If the contentions of the learned
counsel for the respondent Banks are to be accepted, it would render
the entire scheme of all Rent Control Acts operating in the country as
useless and nugatory. Tenants would be left wholly to the mercy of their
landlords and in the fear that the landlord may use the tenanted premises
as a security interest while taking a loan from a bank and subsequently
E default on it. Conversely, a landlord would simply have to give up the
tenanted premises as a security interest to the creditor banks while he is
still getting rent for the same. In case of default of the loan, the maximum
brunt will be borne by the unsuspecting tenant, who would be evicted
from the possession of the tenanted property by the Bank under the
F provisions of the SARFAESI Act. Under no circumstances can this be
permitted, more so in view of the statutory protections to the tenants
under the Rent Control Act and also in respect qf contractual tenants
along with the possession of their properties which shall be obtained
with due process of law.
G 25. The issue of determination of tenancy is also one which is
well settled. While Section 106 of the Transfer of Property Act, 1882
does provide for registration of leases which are created on a year to
year basis, what needs to be remembered is the effect of non-registration,
or the creation of tenancy by way of an oral agreement. According to
Section I 06 of the Transfer of Property Act, 1882, a monthly tenancy
H
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 439
[V. GOPALA GOWDA, J.]

shall be deemed to be a tenancy from month to month and must be A
registered if it is reduced into writing. The Transfer of Property Act,
however, remains silent on the position of law in cases where the
agreement is not reduced into writing. If the two parties are executing
their rights and liabilities in the nature ofa landlord-tenant relationship
and if regular rent is being paid and accepted, then the mere factum of
B
non-registration of deed will not make the lease itself nugatory. If no
written lease deed exists, then such tenants are required to prove that
they have been in occupation of the premises as tenants by producing
such evidence in the proceedings under Section 14 of the SARFAESI
Act before the learned Magistrate. Further, in terms of Section 55(2) of
the special law in the instant case, which is the Rent Control Act, the c
onus to get such a deed registered is on the landlord. In light of the same,
" neitherthe landlord nor the banks can be permitted to exploit the fact of
non registration of the tenancy deed against the tenant. Further, the learned
counsel for the appellants rightly placed reliance on a three Judge Bench
decision of this Court in A11tlu111y (supra). At the cost of repetition, in
D
that case it was held as under:
"But the above finding does not exhaust the scope of the issue
whether the appellant was a lessee of the building. A lease of
immovable property is defined in Section I 05 of the TP Act. A
transfer of a right to enjoy a property in consideration of a price
paid or promised to be rendered periodically or on specified E
occasions is the basic fabric for a valid lease. The provision says
that such a transfer can be made expressly or by implication .
. Once there is such a transfer ofright to enjoy the property a lease
stands created. What is mentioned in the three paragraphs of the
first part of Section I 07 of the TP Act are only the different modes F
of how leases are created. The first paragraph has been extracted
above and it deals with the mode of creating the particular kinds
of leases mentioned therein.
The third paragraph can be read along with the above as it contains
a condition to be complied with ifthe parties choose to create a G
lease as per a registered instrument mentioned therein.
All other leases, if created, necessarily fall within the ambit of the
second paragraph. Thus, de hare the instrument parties can create
a lease as envisaged in the second paragraph of Section I 07 which
reads thus:
H

'··-~•I'- ,_,--,
440 SUPREME COURT REPORTS [2016] 1 S.C.R.

A All other leases of immovable property may be made either by a
registered instrument or by oral agreement accompanied by
delivery of possession."
26. It further saddens us to see the manner in which the decision
in the case of Hars/uu/ Gov11rdlum Sondagftr (supra) has been
B misinterpreted to create this confusion. Random sentences have been
picked up from the judgment and used, without any attempt to understand
the true purp01t of the judgment in its entirety.
27. It is a well settled position of law that a word or sentence
cannot be picked up from a judgment to construe that it is the ratio
c decidendi on the relevant aspect of the case. It is also a well settled
position of law that a judgment cannot be read as a statute and interpreted
and applied to fact situations. An eleven Judge Bench of this Court in
the case of H.H. Malum!iadlliraja Mad/l(fv Rft0 Jivaji Rao Seim/ht
Baliadur of Gwalior & Ors. " Union of bufia' held as under:

D "ft is difficult to regard a word. a clause or a sentence occurring
in a judgment of this Court, divorced from its context, as containing
a full exposition of the law on a question when the question did
not even fall to be answered in that judgment."
The same view was reiterated by a Division Bench of this Court
in the case of Commissioner of I11come Tax v. Sun Engineering
E
Works (P.) Ltd. 8 Further, a three Judge Bench of this Court in the case
of Union of India 1~ D/l(ftl(/Wanti Devi & Ors.' held as under:
"9. lt is not everything said by aJ udge while givingjudgment that
constitutes a precedent. The only thing in ajudge's decision binding
a party is the principle upon which the case is decided and for this
F
reason it is important to analyse a decision and isolate from it the
ratio decidendi. According to the well-settled theory of precedents.
every decision contains three basic postulates - (i) findings of
material facts, direct and inferential. An inferential finding of facts
is the inference which the Judge draws from the direct, or
G perceptible facts; (ii) statements of the principles oflaw applicable
to the legal problems disclosed by the facts; and (iii) judgment

7 (1971) I SCC85
'(1992)4SCC363
H , (1996)6 sec 44
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 441
[V. GOPALA GOWDA, J.]

based on the combined effect of the above. A decision is only an A
authority for what it actually decides. What is of the essence in a
decision is its ratio and not every observation found therein nor
what logically follows from the various observations made in the
judgment. Every judgmentmust be read as applicable to the
particular facts proved, or assumed to be proved. since the
B
generality of the expressions which may be found there is not
intended to be exposition of the whole law, but governed and
qualified by the particular facts of the case in which such
expressions are to be found. It would, therefore, be not profitable
to extract a sentence here and there from the judgment and to
build upon it because the essence of the decision is its ratio and c
not every observation found therein. The enunciation of the reason
or principle on which a question before a court has been decided
is alone binding as a precedent. The concrete decision alone is
binding between the parties to it, but it is the abstract ratio decidendi,
ascertained on a consideration of the judgment in relation to the
D
subject matter of the decision, which alone has the force of law
and which, when it is clear what it was, is binding. It is only the
principle laid down in the judgment that is binding law under Article
141 of the Constitution. A deliberate judicial decision arrived at
after hearing an'·argument on a question which arises in the case
or is put in issue may constitute a precedent, no matter for what E
reason, and the precedent by long recognition may mature into
rule of stare decisis. It is the rule deductible from the application
oflaw to the facts and circumstances of the case which constitutes
its ratio decidendi.
10. Therefore, in order to understand and appreciate the binding F
force of a decision it is always necessary to see what were the
facts in the case in which the decision was given and what was
the point which had to be decided. No judgment can be read as if
it is a statute. A word or a clause or a sentence in the judgment
cannot be regarded as a full exposition of law. Law cannot afford
to be static and therefore, Judges are to employ an ·intelligent G
technique in the use of precedents ...... "
(emphasis laid by ;this Court)
28.The decision of this Court rendered in the case of Harsluul
Govartllian Sondagar (supra) cannot be understood to have held that
H
442 SLPREME COURT REPORTS [2016] I S.C.R.

A the provisions of the SARFAESI Act override the provisions of the Rent
Control Act, and that the Banks are at Iiberty to evict the tenants residing
in the tenanted premises which have been offered as collateral securities
for loans on which default has been done by the debtor/landlord.
29. As far as granting leasehold rights being created after the
B property has been mortgaged to the bank. the consent of the creditor
needs to be taken. We have already taken this view in the case of
Harshad Govartflw11 So11da~tlr (supra). We have not stated anything
to the effect that the tenancy created after mortgaging the property
must necessarily be registered under the provisions of the Registration
Act and the Stamp Act.
c
30. It is a settled position of law that once tenancy is created, a
tenant can be evicted only after following the due process of law. as
prescribed under the provisions of the Rent Control Act. A tenant cannot
be arbitrarily evicted by using the provisions of the SARFAESI Act as
that would amount to stultifying the statutory rights of protection given
D to the tenant. A non obstante clause (Section 35 of the SARFAESI Act)
cannot be used to bulldoze the statutory rights vested on the tenants
under the Rent Control Act. The expression ·any other '""'for the
time being in force· as appearing in Section 35 of the SARFAESI Act
cannot mean to extend to each and every law enacted by the Central
E and State legislatures. It can only extend to the laws operating in the
same field. Interpreting the non obstante clause of the SARFAESI Act,
a three Judge Bench of this Court in the case of Central Ba11k 1if India
v. State of Kera/a & Ors.'" has held as under:
"18. The DRT Act and Securitisation Act were enacted by
F Parliament in the backdrop of recommendations made by the
Expe1t Committees appointed by the Central Government for
examining the causes for enormous delay in the recovery of dues
of banks and financial institutions which \.Vere adversely affecting
fiscal reforms. The committees headed by Shri T. Tiwari and Shri
M. Narasimham suggested that the existing legal regime should
G be changed and special adjudicatory machinery be created for
ensuring speedy recovery of the dues of banks and financial
institu1ions. Narasimham and Andhyarujina Committees also
suggested enactment of new legislation for securitisation and

H '" 12009) 4 sec 94
VISHAL N. KALSARIA v. BANK OF !NOIA & ORS. 443
[Y. GOPALA GOWDA, .1.)

empowering the banks etc. to take possession of the securities A
and sell them without inte1'vention of the Court.
xxx xxx xxx
110. The DRT Act facilitated establishment of two-tier system of
Tribunals. The Tribunals established at the first level have been
vested with the jurisdiction, powers and authority to summarily B
adjudicate the claims of banks and financial institutions in the matter
of recovery of their dues without being bogged down by the
technicalities of the Code of civil Procedure. The Securitisation
Act drastically changed the scenario inasmuch as it enabled banks,
financial institutions and other secured creditors to recover their c
dues without intervention of the Courts or Tribunals. The
Securitisation Act also made provision for registration and regulation
of securitisation/reconstruction companies, securitisation of
financial assets of banks and financial institutions and other related
prov1s1ons.
D
111. However, what is most significant to be noted is that there is
no provision in either of these enactments by which first charge
has been created in favour of banks, financial institutions or secured
creditors qua the property of the borrower.
112. Under Section 13( I) of the Securitisation Act, limited primacy E
has been given to the right of a secured creditor to enforce· security
interest vis-a-vis Section 69 or Section 69A of the Transfer of
Property Act. In terms of that sub-Section, a secured creditor
can enforce security interest without intervention of the Court or
Tribunal and if the borrower has created any mortgage of the
secured asset, the mortgagee or any person acting on his behalf F
cannot sell the mo11gaged property or appoint a receiver of the
. income of the mo11gaged property or any part thereof in a manner
which may defeat the right of the seemed creditor to enforce
security interest. This provision was enacted in the backdrop of
Chapter VIII ofNarasimham Committee's 2nd Report in which
G
specific reference was made to the provisions relating to
mortgages under the Transfer of Property Act.
113. In an apparent bid to overcome the likely difficulty faced by
the secured creditor which may include a bank or a financial
institution, Parliament incorporated the non obstante clause in
H
444 SUPREME COURT REPORTS [2016] I S.C.R.

A Section 13 and gave primacy to the right of secured creditor vis a
vis other mortgagees who could exercise rights under Sections 69
or 69A of the Transfer of Property Act. However, this primacy
has not been extended to other provisions like Section 38C of the
Bombay Act and Section 26B of the Kera la Act by which first
charge has heen created in favour of the State over the rirop.J<[Jy
B
of the dealer or any person liable to pay the dues of sales tax, etc.

116. The non obstante clauses contained in Section 34( I) of the
DRT Act and Section 35 of the Securitisation Act give overriding
c effect to the provisions of those Acts only if there is anything
inconsistent contained in any other law or instrument having effect
by virtue of any other law. Jn other words, ifthere is no provision
in the other enactments which are inconsistent with the DRT Act
or Securitisation Act, the provisions contained in those Acts cannot
override other legislations."
D (emphasis laid by this Court)
31. If the interpretation of the provisions of SA RFAES I Act as
submitted by the learned senior counsel appearing on behalf of the Banks
is accepted, it would not only tantamount to violation of rule of law, but
would also render a valid Rent Control statute enacted by the State
E Legislature in exercise of its legislative power under Article 246 (2) of
the Constitution oflndia useless and nugatory The Constitution oflndia
envisages a federal feature, which has been held to be a basic feature of
the Constitution, as has been held by the seven Judge Bench of this
Court in the case of S.R. Bomnuti & Ors. v. U11io11 ofImlia 11 , wherein
F Justice K. Ramaswamy in his concurring opinion elaborated as under:
"247. Federalism envisaged in the Constitution oflndia is a basic
feature in which the Union of India is permanent within the territorial
limits set in Article 1 of the Constitution and is indestructible. The State
is the creature of the Constitution and the law made by Articles 2 to 4
G
with no territorial integrity, but a permanent entity with its boundaries
alterable by a law made by Parliament. Neither the relative importance
of the legislative entries in Schedule VII, Lists I and fl of the Constitution,
nor the fiscal control by the Union per se are decisive to conclude that
the Constitution is unitary. The respective legislative powers are traceable

H "(1994) 3 sec 1
VISHAL N. KALSARIA v. BANK OF INDIA & ORS. 445
[V. GOPALA GOWDA, J.]

to Articles 245 to 254 of the Constitution. The State qua the Constitution A
is federal in structure and _independent in its exercise of legislative and
executive power. However, being the creature of the Constitution the
State has no right to secede or claim sovereignty. Qua the Union, State
is quasi-federal. Both are coordinating institutions and ought to exercise
their respective powers with adjustment, understanding and
B
accommodation to render socio-economic and political justice to the
people, to preserve and elongate the constitutional goals including
secularism.
248. The preamble of the Constitution is an integral part of the
Constitution. Democratic form of Government, federal structure, unity
and integrity of the nation, secularism, socialism, social justice and judicial
c
review are basic features of the Constitution."
(emphasis laid by this Court)
32. In view of the above legal position, if we accept the legal
submissions made on behalf of the Banks to hold that the provisions of D
SARFAESI Act override the provisions of the various Rent Control Acts
to allow a Bank to evict a tenaiit from the tenanted premise, which has
become a secured asset of the Bank after the default on loan by the
landlord and dispense with the procedure laid down under the provisions
of the various Rent Control Acts and the law laid down by this Court in
catena of cases, then the legislative powers of the state legislatures are E
denuded which would amount to subverting the law enacted by the State
Legislature. Surely, such a situation was not contemplated by the
Parliament while enacting the SARFAESI Act and therefore the
interpretation sought to be made by the learned counse I appearing on
behalf of the Banks cannot be accepted by this Court as the same is F
wholly untenable in law.
33. We are unable to agree with the contentions advanced by the
learned counsel appearing on behalf of the respondent Banks.
34. In view of the foregoing, the impugned judgments and orders
passed by the High Court/ Chief Metropolitan Magistrate are set aside G
and the appeals are allowed. We further direct that the amounts which
are in deposit pursuant to the conditional interim order of this Court
towards rent either before the Chief Metropolitan Magistrate/Magistrate
Court or with the concerned Banks, shall be adjusted by the concerned
Banks towards the debt due from the debtors/la11dlords in respect of the
H
446 SUPREME COURT REPORTS [2016] I S.C.R.

A appellants in these appeals. The enhanced rent by way of conditional
interim order shall be continued to be paid to the respective Banks, which
amount shall also be adjusted towards debts of the debtors/landlords. All
the pending applications are disposed or.
Kalpana K Tripathy Appeals allo\\Cd.

B