Dear Friends,
You are aware that in Harshad Govardan Sondagar Vs International Assets and Reconstruction Co. Ltd., and others, the apex court has held that while filing a petition under section 14 of the SARFAESI Act before the CMM or DM, we need to file an affidavit before the CMM or DM, stating that the secured asset is not in possession of a lessee under a valid lease made prior to creation of the mortgage by the borrower or made in 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 SARFAESI Act by the borrower. The relevant portion of the judgement cited supra has been reproduced for your convenience.
“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 (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 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 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 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 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 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 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 delivering possession of the secured asset to the secured creditor”.
Whereas the recent amendment to the SARFAESI Act has not made any changes to the contents of the Affidavit to be filed before the CMM or DM. Further a new provision has been inserted viz., 17 (4A) Where
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Any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy;-
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Has expired or stood determined; or
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Is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or
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Is contrary to terms of mortgage; or
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Is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act; and
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the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured assets falls under sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) or clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.
Please advise
1. Is it sufficient to file an affidavit under section 14 with the contents as prescribed in the Act.
2. Whether the District Magistrate is empowered to conduct any enquiry including as to the claim of tenancy or the power of deciding the tenancy vests with the Debts Recovery Tribunal alone?
