Paragraph numbers below are the court’s original numbering, recovered from the source text.
22. The second case which dealt with the issue of tenants’ rights under the SARFAESI Act is Vishal N. Kalsaria Case (supra). This Court was concerned with the question – Whether a “protected tenant” under the Maharashtra Rent Control Act, 1999 can be treated as a lessee and whether the provisions of the SARFEASI Act, will override the provisions of the Rent Act?
23. After examining the legal and constitutional position, the Court held that while the SARFAESI Act has a laudable objective of providing a smooth and efficient recovery procedure, it cannot override the objective of Rent Acts to control the rate of rent and provide protection to tenants against arbitrary and unreasonable evictions. To resolve this conflict, this Court held that- a) The provisions of the SARFAESI Act cannot be used to override the provisions of the Rent Act. The landlord cannot be permitted to do indirectly what he has been barred from doing under the Rent Act. b) While a yearly tenancy requires to be registered, oral tenancy can still be proved by showing that the tenant has been in occupation of the premises before the Magistrate under Section 14 of the SARFAESI Act. c) The non-registration of the tenancy deed cannot be used against the tenant. For leasehold rights being created after the property has been mortgaged to the bank, the consent of the creditor needs to be taken. d) Even though Section 35 of the SARFAESI Act has a non obstante clause, it will not override the statutory rights of the tenants under the Rent Control Act. The non obstante clause under Section 35 of the SARFAESI Act only applies to laws operating in the same field.
24. While we agree with the principle laid out in Vishal N. Kalsaria Case (supra) that the tenancy rights under the Rent Act need to be respected in appropriate cases, however, we believe that the holding with respect to the restricted application of the non obstante clause under section 35 of SARFAESI Act, to only apply to the laws operating in the same field is too narrow and such a proposition does not follow from the ruling of this Court in Harshad Govardhan Case (supra).
25. In our view, the objective of SARFAESI Act, coupled with the T.P. Act and the Rent Act are required to be reconciled herein in the following manner: BAJARANG SHYAMSUNDER AGARWAL v. CENTRAL BANK OF INDIA & ANR. [N. V. RAMANA, J.] a) 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. b) 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 T.P. Act. c) 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 T.P. Act.
26. In the present case, the bona fides of the tenant is highly doubtful, as there is no good or sufficient evidence to establish the tenancy in the first place. The present case involves a tenant who allegedly entered into an oral agreement of tenancy before the mortgage deed was entered into between the borrower and Bank/Creditor. Additionally, it must be noted that tenancy created under such an oral agreement, results in a fresh tenancy after the expiry of statutory period fixed under the T.P Act.
27. The records also do not demonstrate that the appellant-tenant has been able to prove his status as a valid leaseholder to merit the protection sought for. Admittedly, an equitable mortgage on the secured asset was created by the respondent no. 2-borrower/landlord by depositing title deeds with respondent no. 1-bank on 20.05.2000. However, the date of creation of the tenancy is not established in the present case. It is to be noted that the appellant-tenant, while seeking protection before the Small Causes Court, stated that the premises were let out to him in January, 2000, but the Court noted that the appellant- tenant produced photocopies of rent receipts for the period of 2001 to 2011. Contrarily, the appellant-tenant, in this appeal before us, has stated that he entered into the tenancy in October, 2005.
28. The claim of tenancy made by the appellant-tenant is not supported by a registered instrument. We recognise the legal position, as laid out in the Vishal N. Kalsaria Case (supra), that in the absence of a written lease deed the tenant may prove his existing rights by producing other relevant evidence before the Magistrate. The appellant-tenant has to produce evidence of payment of rent, property taxes, etc. Furthermore, if the rent and permitted increases were payable, then the quantum ought to have been mentioned. In addition to the above, the claim of tenancy could have been substantiated by relying upon other tax receipts such as BMC tax, water tax, electricity charges consumed by the tenant, etc. However, the appellant-tenant has only submitted xerox copies of rent receipts.
29. Although the Small Causes Court held that the appellant-tenant seems to have, prima facie, a right over the secured asset, the order was passed ex parte, against the respondent no. 2-borrower/landlord, who did not oppose the application. It is to be noted that the prima facie case was decided in favour of the appellant-tenant solely on the basis of the xerox copies of rent receipts produced by him.
30. The respondent no. 1-bank has vehemently contested the bona fides of the appellant-tenant and has argued that the claim of tenancy has been raised just to defeat the legal process of realisation of dues as per the SARFAESI Act. To substantiate this claim, the respondent no. 1-bank has placed on record a legal scrutiny report dated 08.05.2000, wherein the property is indicated to be self-occupied by the respondent no. 2-borrower/landlord for residential usage. Additionally, the aforesaid fact is corroborated by the non-encumbrance certificate submitted by the respondent no. 2-borrower/landlord at the time of creation of the mortgage. Furthermore, the respondent no. 1-bank has also placed a letter dated 12.07.2016 from the Housing Society that BAJARANG SHYAMSUNDER AGARWAL v. CENTRAL BANK OF INDIA & ANR. [N. V. RAMANA, J.] maintains the secured asset, which confirmed that no tenancy had been created on the secured asset.
31. It is pertinent to note that at the time when the SARFAESI Act proceedings were pending, the factum of tenancy was never revealed by the parties. The earlier order dated 09.03.2012, passed by the Chief Metropolitan Magistrate, Esplanade, Mumbai directing the Assistant Registrar to take over the possession of the secured asset, is silent about any existing encumbrance over the secured asset. It was only after passing of the aforesaid order of the Chief Metropolitan Magistrate, that the appellant-tenant started agitating his rights before the Small Causes Court based on a completely different fact scenario, without a whisper of the alleged tenancy under the concluded Section 14, SARFAESI Act proceedings. The respondent no.2-borrower/landlord did not even respond to the claims of the appellant-tenant. The respondent no.1- bank has produced multiple records to substantiate their claim that the tenant was nowhere to be seen earlier and that this tenancy was created just to defeat the proceedings initiated under the SARFAESI Act. On the contrary, the appellant-tenant has failed to produce any evidence to substantiate his claim over the secured asset. In such a situation, the appellant-tenant cannot claim protection under the garb of the interim protection granted to him, ex parte, by solely relying upon the xerox of the rent receipts.
32. In such an event, wherein the claim of the appellant-tenant is not supported by any conclusive evidence, the rejection of the stay application by the Chief Metropolitan Magistrate cannot be held to be erroneous. Although the counsel of the appellant-tenant has placed ample reliance upon the Vishal N. Kalsaria Case (supra), but the same would not help the cause of the appellant-tenant herein, as the earlier case proceeded with the assumption of a valid and bona fide tenancy. But in the present case, the stay application of the appellant-tenant seems to be an afterthought. It is clear that the respondent no. 2-borrower/ landlord never intimated the respondent no. 1-bank about the alleged tenancy. In light of the above, we are unable to accept the claim of bona fide tenancy of the appellant-tenant.
33. In any case, considering the counterfactual pleaded by the appellant-tenant himself, that he was a tenant who had entered into an oral agreement, such tenancy impliedly does not carry any covenant for renewal, as provided under Section 65-A of T.P. Act. Therefore, in any case, Section 13 (13) SARFAESI Act bars entering into such tenancy beyond January, 2012. As the notice under Section 13 (2) SARFAESI Act was issued on 30.04.2011, subsequent reckoning of the tenancy is barred. Such person occupying the premises, when the tenancy has been determined, can only be treated as a ‘tenant in sufferance’. We should note that such tenants do not have any legal rights and are akin to trespassers.
34. In this context we may refer to R.V. Bhupal Prasad v. State of A.P. and Ors., AIR 1996 SC 140, wherein a two Judge Bench of this Court, speaking through Ramaswamy, J., made the following pertinent observations in paragraph 8 of the Report: “8. Tenant at sufferance is one who comes into possession of land by lawful title, but who holds it, by wrong after the termination of the term or expiry of the lease by efflux of time. The tenant at sufferance is, therefore, one who wrongfully continues in possession after the extinction of a lawful title. There is little difference between him and a trespasser. “
35. On the same lines are the decisions of this Court in Smt. Shanti Devi v. Amal Kumar Banerjee, AIR 1981 SC 1550, Murlidhar Jalan (since deceased) through his Lrs. v. State of Meghalaya and Ors., AIR 1997 SC 2690 and D.H. Maniar and Ors. v. Waman Laxman Kudav, [1977] 1 SCR 403.
36. The operation of the Rent Act cannot be extended to a ‘tenant- in-sufferance’ vis-a-vis the SARFAESI Act, due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act. A 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 self-executory instrument for debt recovery. Moreover, such an interpretation would also violate the mandate of Section 35, SARFAESI Act which is couched in broad terms.
37. As noted above, this case, does not mandate the additional protection to be provided under the Rent Act, to the appellant-tenant herein. The lower Courts are correct in ordering delivery of possession to the respondent no. 1-bank as the tenancy stands determined. Before we part, we must note that we have not interpreted the new amendment per se or the law with respect to other categories of tenants, which may be taken up in appropriate cases. BAJARANG SHYAMSUNDER AGARWAL v. CENTRAL BANK OF INDIA & ANR. [N. V. RAMANA, J.]
38. In the present case, as we are in the year 2019, which is 7 years beyond the deadline of 2012, it is ordered that the appellant-tenant shall hand over the possession of the secured asset within 12 weeks of this order to the Assistant Registrar at Bandra Centre of Courts, Mumbai, who in turn shall deliver the same to the respondent no.1-bank. This Court is further of the opinion that such devious practices by the borrower to obstruct the rights of the bank to legitimately realize its dues cannot be appreciated by this Court. Accordingly, we dismiss this appeal. Nidhi Jain Appeal dismissed.