Hemraj Ratnakar Salian vs Hdfc Bank Ltd. on 17 August, 2021

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Supreme Court of India
Hemraj Ratnakar Salian vs Hdfc Bank Ltd. on 17 August, 2021Author: S. Abdul Nazeer

Bench: S. Abdul Nazeer, Krishna Murari

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURSIDCITON
CRIMINAL APPEAL NO(s).843­844 OF 2021
(Arising out of S.L.P. (Crl.) No(s). 2969­2970 of 2016)

HEMRAJ RATNAKAR SALIAN …APPELLANT(s)

VERSUS

HDFC BANK LTD. & ORS. …RESPONDENT(s)

JUDGMENT

S.ABDUL NAZEER, J.

Leave granted.

2. These appeals are directed against the Orders dated

30.12.2015 and 06.01.2016 in Case C.C. No.381/SA/2014 passed

by the Chief Metropolitan Magistrate, Esplanade, Mumbai, rejecting

the Application (Exh.­8) filed by the appellant herein for restraining

HDFC Bank, the first respondent herein, from taking possession of
Signature Not Verified

Digitally signed by

the property in the appellant’s possession.
NEETU KHAJURIA
Date: 2021.08.17
16:20:55 IST
Reason:

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3. HDFC Bank had granted financial facility to respondent nos.2

and 3 (for short, ‘the Borrowers’) of Rs.5,50,00,000/­ (Rupees Five

Crore Fifty Lakhs). On 03.04.2013, the Borrowers had mortgaged a

property bearing Flat No.501, 5 th Floor, Solitaire, Village Kopari, Adi

Shankaracharya Road, MHADA Layout, Powai, Andheri (E), Mumbai

(for short, “the Secured Asset”) in favour of the Bank with an

intention to secure the said credit facility.

4. The accounts of the Borrowers were declared as non­

performing assets (NPA) on 31.10.2013. On 25.01.2014, the Bank

issued a notice under Section 13(2) of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002 (for short, “SARFAESI Act”) to the Borrowers. It

is the case of the appellant that he is a tenant of the Secured Asset

on a monthly rent of Rs.20,000/­ since 12.06.2012 with an

increase of 5% every year. He has been paying rent regularly to his

landlord since inception of his tenancy.

5. The appellant filed Exh.8 application before the Magistrate

seeking protection of his possession of the Secured Asset as the

Magistrate was ceased with the petition under Section 14 of

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SARFAESI Act filed by the respondent no.1­Bank. Vide Order dated

30.12.2015, the intervention application of the appellant was

dismissed by the Magistrate holding that there was no registered

tenancy placed on record by the appellant.

6. We have heard learned counsel for the parties. Learned

counsel for the appellant would contend that the appellant is a

protected tenant under the provisions of the Maharashtra Rent

Control Act 1999. He has been paying rent regularly to the landlord.

He has also paid advance rent till 17.12.2018. There are continuous

rent receipts with him from the date of his induction as a tenant.

The tenant was residing in the said premises on the basis of an oral

tenancy from 12.06.2012. Therefore, he cannot be evicted from the

Secured Asset without due process of law.

7. On the other hand, learned counsel for the respondent­Bank

submits that the rent receipt said to have been issued by the

landlord for the period from 12.06.2012 to 12.05.2013 is of

12.05.2013 which is after the date of creation of mortgage in favour

of the Bank. There is absolutely no material to show that the

tenancy was created earlier to the date of mortgage. The tenancy

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pleaded by the appellant is an oral tenancy. At the time of grant of

facility, third­party valuers had confirmed that the Borrowers were

staying at the Secured Asset. The Borrowers, while making

representation to the Bank, have not claimed that any tenant is

staying at the Secured Asset. The tenancy claimed by the appellant

is an after­thought which cannot be believed in the facts and

circumstances of the case. He prays for dismissal of the appeal.

8. We have carefully considered the submissions made at the Bar

and perused the materials placed on the record.

9. As noticed above, it is the case of the appellant that he is a

tenant of the Secured Asset since 12.06.2012 and has paid advance

rent upto 17.12.2018. The documents produced by the appellant

are xerox copies of the rent receipts. However, in response to the

notice issued under Section 13(2) of the SARFAESI Act, the

Borrowers have sent a very detailed representation wherein they

have not claimed that any tenant is staying at the Secured Asset.

The appellant has pleaded tenancy from 12.06.2012 to 17.12.2018.

The rent receipt claiming tenancy from 12.06.2012 is a xerox copy

of 12.05.2013, which is after the date of creation of mortgage.

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10. Procedural mechanism for taking possession of the Secured

Asset is provided under Section 14 of the SARFAESI Act. Section

17 of the SARFAESI Act provides for the right of appeal to any

person including the borrower to approach Debt Recovery Tribunal

(DRT). Section 17 has been amended by Act No. 44 of 2016

providing for challenging the measures to recover secured debts (for

short, “the Amendment”). Under the Amendment, possession can

be restored to the borrower or such other aggrieved person. This

Amendment has come into force w.e.f. 1st September, 2016. This

Court in Harshad Govardhan Sondagar v. International Asset

Reconstruction Co. Ltd. & Ors. 1 has held that right of appeal is

available to the tenant claiming under the borrower. In Kanaiyalal

Lalchand Sachdev v. State of Maharashtra2 this Court has held

that DRT can not only set aside the action of the secured creditor

but even restore the status quo ante. Therefore, an alternative

remedy was available to the appellant to challenge the impugned

order under Section 17 of the SARFAESI Act even before the

amendment to Section 17 of the SARFAESI Act. However, given
1
(2014) 6 SCC 1
2
(2011) 2 SCC 782
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that the instant appeal has been pending consideration before this

Court from the year 2016, we propose to examine the case on

merits without directing the appellant to avail the alternative

remedy.

11. In Harshad Govardhan Sondagar (supra) this Court has

categorically held that if the tenancy claim is for any term exceeding

one year, the tenancy can be made only by a registered instrument.

It was held thus :

“36. We may now consider the contention of the
respondents that some of the appellants have not produced
any document to prove that they are bona fide lessees of
the secured assets. We find that in the cases before us, the
appellants have relied on the written instruments or rent
receipts issued by the landlord to the tenant. Section 107 of
the Transfer of Property Act provides that a lease of
immovable property from year to year, or for any term
exceeding one year or reserving a yearly rent, can be made
“only by a registered instrument” and all other leases of
immovable property may be made either by a registered
instrument or by oral agreement accompanied by delivery of
possession. Hence, if any of the appellants claim that they
are entitled to possession of a secured asset for any term
exceeding one year from the date of the lease made in his
favour, he has to produce proof of execution of a registered
instrument in his favour by the lessor. Where he does not
produce proof of execution of a registered instrument in his
favour and instead relies on an unregistered instrument or
oral agreement accompanied by delivery of possession, the
Chief Metropolitan Magistrate or the District Magistrate, as
the case may be, will have to come to the conclusion that he
is not entitled to the possession of the secured asset for
more than a year from the date of the instrument or from
the date of delivery of possession in his favour by the
landlord.”

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12. A Three­Judge Bench of this Court in Bajarang Shyamsunder

Agarwal v. Central Bank of India & Anr.3, after considering almost

all decisions of this Court, in relation to the right of a tenant in

possession of the secured asset, has held that if a valid tenancy

under law is in existence even prior to the creation of the mortgage,

such tenant’s possession cannot be disturbed by the secured

creditor by taking possession of the property. If a tenancy under

law comes into existence after the creation of a mortgage but prior

to issuance of a notice under Section 13(2) of the SARFAESI Act, it

has to satisfy the conditions of Section 65­A of the Transfer of

Property Act, 1882. If a tenant claims that he is entitled to

possession of a Secured Asset for a term of more than a year, it has

to be supported by the execution of a registered instrument. In the

said decision of this Court, it was clarified that in the absence of a

registered instrument, if the tenant only relies upon an unregistered

instrument or an oral agreement accompanied by delivery of

possession, the tenant is not entitled to possession of the secured

asset for more than the period prescribed under the provisions of

the Transfer of Property Act. It was held thus:
3
(2019) 9 SCC 94
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 “24.1. If a valid tenancy under law is in existence even prior
to the creation of the mortgage, the tenant’s possession
cannot be disturbed by the secured creditor by taking
possession of the property. The lease has to be determined
in accordance with Section 111 of the TP Act for
determination of leases. As the existence of a prior existing
lease inevitably affects the risk undertaken by the bank
while providing the loan, it is expected of banks/creditors to
have conducted a standard due diligence in this regard.
Where the bank has proceeded to accept such a property as
mortgage, it will be presumed that it has consented to the
risk that comes as a consequence of the existing tenancy. In
such a situation, the rights of a rightful tenant cannot be
compromised under the SARFAESI Act proceedings.

24.2. If a tenancy under law comes into existence after the
creation of a mortgage, but prior to the issuance of notice
under Section 13(2) of the SARFAESI Act, it has to satisfy the
conditions of Section 65-A of the TP Act.

24.3. In any case, if any of the tenants claim that he is
entitled to possession of a secured asset for a term of more
than a year, it has to be supported by the execution of a
registered instrument. In the absence of a registered
instrument, if the tenant relies on an unregistered
instrument or an oral agreement accompanied by delivery of
possession, the tenant is not entitled to possession of the
secured asset for more than the period prescribed under
Section 107 of the TP Act.”

13. It was further held that the Rent Act would not come to the aid

of a “tenant­in­sufferance” vis­à­vis SARFAESI Act due to the

operation of Section 13(2) read with Section 13(13) of the SARFAESI

Act. It was held as follows:

“35. The operation of the Rent Act cannot be
extended to a “tenant­in­sufferance” vis­à­vis the
SARFAESI Act, due to the operation of Section 13(2)
read with Section 13(13) of the SARFAESI Act. A

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 contrary interpretation would violate the intention of
the legislature to provide for Section 13(13), which
has a valuable role in making the SARFAESI Act a
self­executory instrument for debts recovery.
Moreover, such an interpretation would also violate
the mandate of Section 35, SARFAESI Act which is
couched in broad terms.”

14. In the present case, first of all there is a serious doubt as to

the bona fide of the tenant, as there is no good or sufficient

evidence to establish the tenancy of the appellant. According to the

appellant, he is a tenant of the Secured Asset from 12.06.2012.

However, the documents produced in support of his claim are xerox

copies of the rent receipts and the first xerox copy of the rent

receipt is of 12.05.2013 which is after the date of creation of the

mortgage. It is pertinent to note here that the Borrowers have not

claimed that any tenant is staying at the Secured Asset. At the time

of grant of facility, third­party valuers had also confirmed that the

Borrowers were staying at the Secured Asset. Be that as it may.

The appellant has pleaded tenancy from 12.06.2012 to 17.12.2018.

This is not supported by any registered instrument. Further, even

according to the appellant, he is a “tenant­in­sufferance”, therefore,

he is not entitled to any protection of the Rent Act. Secondly, even if

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the tenancy has been claimed to be renewed in terms of Section

13(13) of the SARFAESI Act, the Borrower would be required to seek

consent of the secured creditor for transfer of the Secured Asset by

way of sale, lease or otherwise, after issuance of the notice under

Section 13(2) of the SARFAESI Act and, admittedly, no such

consent has been sought by the Borrower in the present case.

15. In view of above, we do not find any merit in these appeals

which are accordingly dismissed.

…………………………………J.
(S. ABDUL NAZEER)

…………………………………J.
(KRISHNA MURARI)
New Delhi;
August 17, 2021.

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