Date of judgement:
17 August 2021
Bench:
Justice S. Abdul Nazeer
Justice Krishna Murari
Parties:
Appellant – Hemraj Ratnakar Salian
Respondent – HDFC Bank Ltd. & Ors
Subject
A tenant who continues to occupy a property even after the expiry of the lease is called ‘tenancy at sufferance.’ This judgement decided whether such a tenant is entitled to seek protection against the proceedings under the SARFAESI Act.
Overview
- In the year 2013, respondents no.2 and 3, availed the financial facility of the HDFC Bank and borrowed an amount of Rs.5,50,00,000/ from them. They had also mortgaged in favour of the bank their apartment situated in Mumbai as a ‘Secured Asset’ in order to secure the loan.
- In 2014, the bank issued a notice to these borrowers under Section 13(2) of the SARFAESI Act, 2002 as their accounts were declared as non-performing assets (NPA). Hemraj Salian (appellant), claiming to be a tenant of the said apartment, had been living there since 2012.
- To protect his possession of the Secured Asset, the appellant filed an intervention application in the court of Magistrate, but it was dismissed on the grounds that no registered tenancy was placed on record by the appellant. Thereby, he approached the Supreme Court.
- The appellant, through his counsel, contended that he has protection under the Maharashtra Rent Control Act, 1999. He claimed to be in possession of the rent receipts from the date of his induction and has also paid advance rent till the year 2018. He argued that since he was residing on the basis of an oral tenancy from 2012, he cannot be evicted from the Secured Asset without the due process of law.
- The counsel for the respondent, on the other hand, submitted that the appellant has failed to furnish any proof that the tenancy was created before the date of mortgage. He further said that the borrowers did not disclose that any tenant was staying at the Secured Asset when the loan was provided to them. He believed that the tenancy claimed by the appellant is an afterthought and should be dismissed.
Legal Provisions
- Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) – A Secured creditor may require the borrower to discharge his liabilities in full within 60 days from the date of the notice.
Issues
- Whether a tenant in sufferance can seek protection under the Rent Act against the proceedings of the SARFAESI Act?
Judgement
- In Bajarang Shyamsunder Agarwal V. Central Bank of India, the three-judge bench had observed that if a tenant claims possession of a Secured Asset for a term exceeding one year, then it has to be supported by execution of a registered instrument. Also, in absence of such instrument, the tenant shall not be entitled to possession beyond the prescribed period under the provisions of the Transfer of Property Act.
- In its earlier judgements, the Supreme Court had also established that the Rent Act would not come to the aid of a tenant in sufferance against Section 13(2) of the SARFAESI Act. Keeping in mind the above points, the Court first considered the legitimacy of the appellant’s tenancy.
- The Court held that the documents submitted by the appellant, are xerox copies of rent receipts. Also, it is dated as 12.05.2013, which is after the date of creation of the mortgage. They also emphasised that the borrowers had nowhere even mentioned that a tenant is staying at the Secured Asset when the loan was acquired. Further, the tenancy claimed by the appellant is not supported by any registered instrument.
- Finally, the Court declared that the appellant, in this case, is not entitled to any protection under the Rent Act. It also said that even if the tenancy was renewed, the borrower would have to seek the permission of the secured creditor before such transfer is done by lease, and no such consent was sought by the borrower in this case. The appeal was thereby disposed of.
Conclusion
In conclusion, if the tenant in absence of a registered instrument relies only upon an unregistered instrument or oral agreement, then such a tenant shall not be entitled to the possession beyond the prescribed period.
The Court held that this interpretation of the Act is imperative because if a contrary view is adopted, it would go against the intention of the legislature to provide Section13(13), which plays a vital role in making the SARFAESI Act a self-executory instrument for debt recovery.
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