Canara Bank Mullakkal, Alappuzha Branch v. Sachin Shyam Proprieter, M/S. Skilderz Developers, Arjunam; Shyam Raju; Sajikumar T.M.; Rajeev R.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT** **THE HONOURABLE MR. JUSTICE GOPINATH P.** **MONDAY, THE 19TH DAY OF DECEMBER 2022 / 28TH AGRAHAYANA, 1944** ## **WP(C) NO. 28054 OF 2021** **PETITIONER:** CANARA BANK MULLAKKAL, ALAPPUZHA BRANCH, VSV BUILDING, IRON BRIDGE (PO), MULLAKKAL, ALAPPUZHA DISTRICT, KERALA, PIN688011, REPRESENTED BY ITS AUTHORISED OFFICER. BY ADVS. K.V.ANIL M.J.RAJASREE ANIRUDH KADAVIL ## **RESPONDENT/S:** 1 SACHIN SHYAM PROPRIETOR, M/S. SKILDERZ DEVELOPERS, S/O. SRI.SHYAM RAJU, ARJUNAM, THIRUVAMPADY JUNCTION P.O., ALAPPUZHA688002. 2 SHYAM RAJU, S/O. SRI. PADMANABHAN, ARJUNAM, THIRUVAMPADY JUNCTION P.O., ALAPPUZHA-688002. 3 SAJIKUMAR T.M., AGED 46 YEARS S/O. LATE THANKAPPAN, MACHINGAPARAMBU, PAZHAVEEDU P.O., ALAPPUZHA-688009. 4 RAJEEV R., S/O. SRI. RAJAN K., POOJA, RAJ BHAVAN, EAST OF KOMALAPURAM, SOUTH ARYAD, ALAPPUZHA-688521. BY ADVS. K.S.HARIHARAPUTHRAN C.C.ANOOP BHANU THILAK THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19.12.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C)No.28054/2021 2 **'C.R.'** ## **J U D G M E N T** The petitioner is a Banking Company constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970. It has approached this Court being aggrieved by Ext.P7 order of the Chief Judicial Magistrate Court, Alappuzha, in proceedings under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (hereinafter referred to as the ‘SARFAESI’ Act) Act. 2. The petitioner, a secured creditor in respect of a loan availed by the 1[st] respondent, brought to sale an item of property in which the 3[rd] respondent claims to be a tenant under the provisions of the SARFAESI Act. The property was purchased by the 4[th] respondent. The application filed by the petitioner under Section 14 of the SARFAESI Act for obtaining vacant possession of the property has been rejected by the learned Magistrate finding _inter alia_ the rights of the tenant cannot be defeated by the provisions in the SARFAESI Act. The learned Magistrate has concluded that the tenancy was created much before the creation of the mortgage, and therefore such tenants cannot be evicted by reporting to proceedings under Section 14 of the W.P.(C)No.28054/2021 3 SARFAESI Act. 3. The learned counsel appearing for the petitioner submits that the learned Magistrate has travelled beyond the scope of Section 14 of the SARFAESI Act and has decided matters outside the purview of an enquiry under Section 14. It is submitted that the application under Section 14 of the SARFAESI Act was filed as the petitioner had not obtained physical possession of the secured asset. It is submitted that the application under Section 14 was maintainable and that there were no documents whatsoever to establish that the 3[rd] respondent was a bonafide tenant. It is submitted that the recovery proceedings initiated by the petitioner Bank have been thwarted by collusive action between the original borrower and the 3rd respondent. The learned counsel placed reliance on the judgments of the Supreme Court in _**Harshad Govardhan Sondagar** v._ _**International Assets Reconstruction Co.Ltd. & Ors; (2014) 6 SCC 1, Bajarang Shyamsundar Agarwal v. Central Bank of India; (2019) 9 SCC 94, Hemraj Ratnakar Salian v. HDFC Bank Ltd. & Ors. 2021 SCC Online SC 611**_ and the judgment of this Court in _**The Kottakkal Co-Operative Urban Bank v. T. Balakrishnan & Another; CDJ 2008 Ker HC 262,**_ to contend that, in the absence of a registered agreement, the 3rd respondent could not claim any W.P.(C)No.28054/2021 4 right as a tenant. It is also pointed out that, even after the sale of the asset in favour of the 4th respondent, the petitioner continued to be a secured creditor entitled to exercise the rights of a secured creditor u/s.14 of the SARFAESI Act in the light of the law laid down in _**ITC Limited v. Blue Coast Hotels Ltd & Others in (2018) 15 SCC 99.**_ 4. The learned counsel appearing for the 3rd respondent would contend that the learned Chief Judicial Magistrate has committed no error and the order of the learned Magistrate cannot be interfered with by this Court in the exercise of jurisdiction under Article 226 of the Constitution of India. It is submitted that the notice u/s.13 (2) of the SARFAESI Act was issued on 24.1.2020, followed by Ext.P2 notice u/s.13(4) on 16.10.2020. It is submitted that the sale notice published by the Bank on 24.3.2021 clearly shows that the asset was sold in ‘as is where is’ condition. It is submitted that Ext.P5 is the initial order passed by the learned Chief Judicial Magistrate, Alappuzha permitting the application filed u/s.14 of the SARFAESI Act. It is submitted that this order was subsequently recalled through Ext.P7 order dated 11.11.2021, at the instance of the 3rd respondent. It is submitted that there are documents such as municipal records etc., which would establish that the 3rd respondent is a tenant in respect of W.P.(C)No.28054/2021 5 the secured asset from the year 1976 and the rights of the 3rd respondent to continue in occupation stands protected by the Rent Control Laws which cannot be defeated by filing an application u/s.14 of the SARFAESI Act. 5. Having heard Sri. Anirudh Kadavil, the learned counsel appearing for the petitioner and Sri. Hariharaputhran, the learned counsel appearing for the 3rd respondent, I am of the view that the petitioner is entitled to succeed. The question as to whether the Magistrate is required to consider the right of tenants in an application filed u/s.14 of the SARFAESI Act came up for consideration before the Supreme Court in _**Balkrishna Rama Tarle Dead Thr. LRS & Anr**_ . v. _**Phoenix ARC Private Limited & Ors; 2022 (5) KLT OnLine 1150 (SC) (judgment dated 26.9.2022 in S.L.P.No.16013/2022).**_ The facts of that case show that the secured creditor had preferred an application u/s.14 of the SARFAESI Act before the designated authority u/s. 14 of that Act. The petitioner in the Special Leave Petition claimed to be a tenant in respect of some parts of the secured asset in question and claimed that he could not be evicted without following the legal process for eviction. The tenant also relied on an order obtained by him in a Civil Suit filed by him against one of the borrowers, where an order restraining his dispossession W.P.(C)No.28054/2021 6 from the premises in question came to be issued. The designated authority _inter alia_ held that the possession of the secured asset could be taken only upon termination of the tenancy right of the petitioner in the Special Leave Petition. This order of the designated authority was set aside by the High Court of Judicature at Bombay in W.P. (C)No.9749/2021. That order of the Division Bench was challenged before the Supreme Court by filing S.L.P.No.16013/2022. On a consideration of the matter, and following the judgment in _**M/s R.D Jain & Co. v. Capital First Ltd. & ors**_ (Judgment in Civil Appeal No. 175/2022 dated 27.07.2022) the Supreme Court held as follows:- _“Thus, the powers exercisable by CMM/DM under Section 14 of the SARFAESI Act are ministerial step and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets. In that view of the matter once all the requirements under Section 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner. At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under Section 17 of the SARFAESI Act, before Debts Recovery Tribunal. Under the circumstances in the present case no error has been committed by the High Court in setting aside the order dated 27.08.2021 passed by the designated authority keeping the application pending till the secured creditor initiates the legal_ W.P.(C)No.28054/2021 7 _proceedings for eviction of the tenant cannot get the possession in an application under Section 14 of the SARFAESI Act. The High Court has rightly directed the designated authority to proceed further with the application under Section 14 of the SARFAESI Act, and to dispose of the same in accordance with the provisions of Section 14 of the SARFAESI Act.”_ In the light of the law laid down by the Supreme Court in _**Balkrishna Rama Tarle (supra),**_ Ext.P7 order of the learned Chief Judicial Magistrate, Alappuzha cannot be sustained. Even in the facts of this case, the 3rd respondent has no case that any proceeding initiated by the petitioner u/s.14 of the SARFAESI Act had been challenged by the 3rd respondent in proceedings before the Debts Recovery Tribunal u/s.17 of the SARFAESI Act. Still further it must be noticed that, in the light of the law laid down by the Supreme Court in _**Bajarang Shyamsundar Agarwal (supra)**_ , the absence of a registered document will establish that the tenant is not entitled to possession of secured asset for a period exceeding the limit prescribed u/s.107 of the Transfer Property Act. It is also evident on a reading of Ext.P7 order that the learned Magistrate travelled far outside the scope of enquiry u/s.14 of the SARFAESI Act. Moreover, it is clear from the judgment in _**ITC Limited (supra)**_ that the creditor has the right to take actual possession of the secured asset even after transfer of title to an auction purchaser. For all these reasons, I am of the opinion that Ext.P7 order 8 W.P.(C)No.28054/2021 is liable to be set aside in exercise of jurisdiction under Article 226 of the Constitution of India. Therefore, Ext.P7 is quashed. M.C. No.54/2021 will stand restored to the file of the Chief Judicial Magistrate, Alappuzha who shall pass fresh orders in the matter, taking into consideration the law laid down by the Supreme Court in _**Balkrishna Rama Tarle (supra)**_ and also in the light of the observations contained in this judgment. The learned Chief Judicial Magistrate shall pass fresh orders as directed above within a period of two months from the date of receipt of a certified copy of this judgment. The registry shall communicate a copy of this judgment to the learned Chief Judicial Magistrate, Alappuzha, for compliance. **Sd/GOPINATH P. JUDGE** acd W.P.(C)No.28054/2021 9 ## **APPENDIX OF WP(C) 28054/2021** ## PETITIONER EXHIBITS |Exhibit P1|TRUE COPY OF THE DEMAND NOTICE DATED| |---|---| ||24.1.2020 ISSUED BY THE PETITIONER TO THE| ||1ST AND 2ND RESPONDENT AND THE| ||MORTGAGERS.| |Exhibit P2|TRUE COPY OF POSSESSION NOTICE DATED| ||16.10.2020 ISSUED BY THE PETITIONER AND| ||AFFIXED ON THE SECURED ASSET.| |Exhibit P3|TRUE COPY OF THE APPLICATION UNDER| ||SECTION 14(1) OF SARFAESI ACT FILED BY| ||THE PETITIONER ON 9.12.2020 BEFORE THE| ||HONOURABLE CHIEF JUDICIAL MAGISTRATE,| ||ALAPPUZHA.| |Exhibit P4|TRUE COPY OF THE SALE NOTICE DATED| ||24.3.2021 ISSUED BY THE PETITIONER.| |Exhibit P5|TRUE COPY OF THE ORDER DATED 17.4.2021 IN| ||MC NO.54/2021 ISSUED BY THE HONOURABLE| ||CHIEF JUDICIAL MAGISTRATE, ALAPPUZHA.| |Exhibit P6|TRUE COPY OF THE CERTIFICATE DATED| ||2.6.2021 ISSUED BY THE PETITIONER TO THE| ||4TH RESPONDENT.| |Exhibit P7|TRUE COPY OF THE ORDER DATED 11.11.2021| ||ISSUED BY THE HONOURABLE CHIEF JUDICIAL| ||MAGISTRATE, ALAPPUZHA IN CMP NO.1578/2021| ||IN MC NO.54/2021.| |Exhibit P8|TRUE COPY OF THE JUDGMENT IN BAJARANG| ||SHYAMSUNDAR AGARWAL VS. CENTRAL BANK OF| ||INDIA IN CRIMINAL APPEAL NO.1371 OF 2019| ||DATED 11.9.2019 OF SUPREME COURT OF| ||INDIA.| |Exhibit P9|TRUE COPY OF THE JUDGMENT IN HARSHAD| ||GOVARDHAN SONDAGAR VS. INTERNATIONAL| ||ASSETS RECONSTRUCTION CO. LTD. & ORS IN| ||CRIMINAL APPEAL NO.736 OF 2014 DATED| ||3.4.2014 OF SUPREME COURT OF INDIA.| |Exhibit P10|TRUE COPY OF THE JUDGMENT IN HEMRAJ| W.P.(C)No.28054/2021 10 RATNAKAR SALIAN VS. HDFC BANK LTD. & ORS. IN CRIMINAL APPEAL NO.(S). 843-844 OF 2021 DATED 17.8.2021 OF SUPREME COURT OF INDIA.