State Bank of India v. Sheeba Biju and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **THURSDAY, THE 9TH DAY OF FEBRUARY 2017/20TH MAGHA 1938** **WP(C).No. 25597 of 2016 (Y) ----------------------------** **PETITIONER(S): -------------** **STATE BANK OF INDIA, STRESSED ASSETS MANAGEMENT BRANCH, VANKARATH TOWERS, BYPASS JUNCTION, PALARIVATTOM, KOCHI-682 024, REPRESENTED BY ITS CHIEF MANAGER** ## **BY ADV. SRI.S.EASWARAN** **RESPONDENT(S):** **--------------** **1. SHEEBA BIJU, W/O BIJU, PROPRIETRESS, M/S. MATHA TEXTILES, THEKKUMPURAM HOUSE, MANNAMPETTA, VATTANATHARA P.O., THRISSUR DISTRICT-680 302 2. M/S EMMANUAL SILKS, TMC.IX/33, UA/596/1, REPRESENTED BY ITS MANAGING PARTNER SRI.BIJU, SAKTHAN THAMPURAN NAGAR, THRISSUR-680 001** *** 3. SRI. T.O.SHAJU,** **S/O LATE T.D.OUSEPH, RESIDING AT THEKKUMPURAM HOUSE, MANNAMPETTA, THRISSUR-680 302. [DELETED] 4. SRI. T.O. BYJU, S/O LATE T.D.OUSEPH, RESIDING AT THEKKUMPURAM HOUSE, MANNAMPETTA, THRISSUR-680 302** ## **WP(C).No. 25597 of 2016 (Y)** ## **----------------------------** - **5. SRI.T.O.RAJU, S/O LATE T.D.OUSEPH, RESIDING AT THEKKUMPURAM HOUSE, MANNAMPETTA, THRISSUR-680 302.[DELETED]** - **[ RESPONDENTS NO.3 AND 5 ARE DELETED FROM THE PARTY ARRAY AS PER ORDER DATED 01/11/2016 IN IA.16740/16 IN THE WP(C).]** **6. SRI. T.O. JIJU, S/O LATE T.D.OUSEPH, RESIDING AT THEKKUMPURAM HOUSE, MANNAMPETTA, THRISSUR-680 302** **7. SMT. ANNIE OUSEPH, W/O LATE T.D.OUSEPH, RESIDING AT THEKKUMPURAM HOUSE, MANNAMPETTA, THRISSUR-680302** **R1 BY ADV. SRI.PRASAD CHANDRAN R2-R4 BY ADVS. SRI.SHAJI CHIRAYATH SMT.JIJI M. VARKEY SMT.SAVITHA GANAPATHIYATAN SRI.M.M.SHAJAHAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 09-02-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **SKG** ## **WP(C).No. 25597 of 2016 (Y)** ## **----------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **----------------------EXHIBIT:P1 COPY OF THE APPLICATION, CRL.M.P.NO. 352/16 FILED UNDER SECTION 14 OF THE SECURITIZATION ACT EXHIBIT:P2 COPY OF THE LETTER OF ACKNOWLEDGMENT DT. 12/5/10 EXHIBIT:P3 COPY OF THE APPLICATION FILED BY THE 1ST RESPONDENT IN CRL.M.P.NO.352/16 EXHIBIT:P4 COPY OF THE UNREGISTERED LEASE DEED DT. 15/10/13 BETWEEN RESPONDENTS 1 AND3 EXHIBIT:P5 COPY OF THE COUNTER AFFIDAVIT FILED BY THE PETITIONER EXHIBIT:P6 COPY OF THE ADDITIONAL COUNTER AFFIDAVIT FILED BY THE PETITIONER EXHIBIT:P7 COPY OF THE JUDGMENT DT. 23/3/16 IN WPC 11181/16 EXHIBIT:P8 COPY OF THE ORDER DT. 24/6/16 IN CMP NO. 1752/16 IN CRL. M.P.NO. 352/16** ## **RESPONDENT(S)' EXHIBITS** **----------------------NIL** **/TRUE COPY/** **P.S. TO JUDGE** **SKG** ## **K. VINOD CHANDRAN, J.** ## **===================== W.P.(C)No.25597 of 2016 - Y** ## **========================= Dated this the 09[th] day of February, 2017** ## **J U D G M E N T** The creditor Bank, who proceeded against the property under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 is before this Court, challenging the order of the learned Chief Judicial Magistrate, Thrissur, at Ext.P8, which refused to allow the petitioner to take possession of the property, for reason of the 1[st] respondent being in occupation as a valid lessee. The learned Counsel for the petitioner and the respondents have relied on the decision in **Vishal N. Kalsaria** v. **Bank of India and others [2016 (3) SCC 762]** , which clarifies the earlier decision of the Hon'ble Supreme Court in **Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. [(2014)6 SCC 1]** . 2 W.P.(C)No.25597 of 2016 - Y 2. The issue is in a short compass as to whether the lease granted after the mortgage was valid or not. The mortgage of the property was made by deposit of title deed on 11.05.2010 confirmed by a letter dated 12.05.2010. The 1[st] respondent claims tenancy by virtue of Annexure A produced along with Ext.P4 application before the CJM. The tenant claimed before the CJM that since she had been validly put in occupation of the premises, by the owner of the premises by a lease deed at Annexure A, there could be no termination of her rights to continue occupation of the building by virtue of the proceedings under the SARFAESI Act. 3. The Bank contented that the lease was unregistered and hence not valid, for reason of the term being beyond one year, which transfer of property by way of lease had to be compulsorily registered. The CJM rejected the contention of the Bank relying on **Vishal N. Kalsaria** (supra) to find that even if the deed is un-registered, the Hon'ble Supreme Court 3 W.P.(C)No.25597 of 2016 - Y has found that the provisions of the SARFAESI Act will not over ride the provisions of the Rent Control Act. The un-registered deed could be relied on for collateral purposes and the person who has been put in occupation would be a tenant holding over. The declaration in the decision of the Hon'ble Supreme Court was to the effect that if there is existing, rights and liabilities, in the nature of land lord and tenant and if regular rent is being paid, then the fact of non-registration of the document would be irrelevant. 4. The learned Counsel for the respondent Bank however, submits that even going by **Vishal N. Kalsaria** there could be no relief granted to the respondent herein. He also relies on the judgment of a learned Single Judge of this Court in **Kelukutty P.M and Others v. Young Men's Christian Association and Others [2016 (1) KHC 493]** as confirmed by the Division Bench in **Kelukutty P.M and Others v. Young Men's Christian Association and Others [2016 (1) KHC 853]** . 4 W.P.(C)No.25597 of 2016 - Y It is to be noted that the decision of the learned Single Judge was passed simultaneous to **Vishal N. Kalsaria** , but the Division Bench noticed **Vishal N. Kalsaria** and confirmed the decision of the learned Single Judge. 5. The facts in the aforesaid decision were that the tenant was inducted into the building, which was constructed by the owner of the building after availing a financial facility from the Bank. The agreement executed between the Bank and the borrower also permitted lease of the properties and the remittance of the advance amounts received on such lease being executed. Despite that the Division Bench found that **Vishal N. Kalsaria** would not be applicable insofar as the agreement not being a mortgage deed and there being no contrary intention specified as provided under Section 65A(3) of the Transfer of Property Act, 1882 (for brevity 'the Act of 1882). 5 W.P.(C)No.25597 of 2016 - Y ## 6. Section 65A of the Act of 1882 is extracted ## hereunder:- ## **65A. Mortgagor's power to lease:-** (1) Subject to the provisions of sub-section(2), a mortgagor, while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee. (2) (a) Every such lease shall be such as would be made in the ordinary course of management of the property concerned, and in accordance with any local law, custom or usage. (b) Every such lease shall reserve the best rent that can reasonably be obtained, and no premium shall be paid or promised and no rent shall be payable in advance, © No such lease shall contain a covenant for renewal, (d) Every such lease shall take effect from a date not later than six months from the date on which it is made, (e) In the case of a lease of buildings, whether leased with or without the land on which they stand, the duration of the lease shall in no case exceed three years, and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid with a time therein specified. (3) The provisions of sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage-deed; and the provisions of subsection (2) may be varied or extended by the mortgage-deed and, as so varied and extended, shall, as far as may be, operate in like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that 6 W.P.(C)No.25597 of 2016 - Y sub-section. 7. There is no warrant for any further discussion on the effect of the provision, since the same has been comprehensively discussed in the decisions above referred. The principles that can be culled out from the aforesaid decisions are that despite a mortgage having been validly created, the mortgagor would be at liberty to lease out the building in the mortgaged land so far as there is no contrary intention in the mortgage deed, subject however to the specific conditions as provided under sub-section (2) of Section 65A of the Act of 1882, which also could be waived by a specific recital in the mortgage deed. 8. In the context of a contrary intention being specified in the mortgage deed as to the right being taken away or the lease could not at all be made. Also if the conditions in sub-clause(b) of sub-section(2) of Section 65A of the Act of 1882, are modified, altered or completely withdrawn 7 W.P.(C)No.25597 of 2016 - Y the lease could only be in accordance with sub-section (2) of Section 65A of the Act of 1882. The non-registration of a deed conferring tenancy on a person would also be of no consequence, since the same could be used for collateral purposes and the tenant could be considered as a person, who is holding over month to month, in which event, the protection under the Rent Control Act would not be taken away. 9. In the present case, there is no mortgage deed and hence there is no contrary intention indicated and the mortgagor has the power to lease, but subject to the conditions under sub-section(2) of Section 65A of the Act of 1882. The lease deed in the present case is one, creating a lease for a period of 10 years, which is a compulsorily registerable document. De hors that; the lease for 10 years goes against the specific prohibition in sub-clause (e) of sub-section(2) of Section 65A of the Act of 1882, which restricts the duration of the lease to be not more than three 8 W.P.(C)No.25597 of 2016 - Y years. There is also no evidence led as to the rent having been paid as per the agreement and though of not much consequence, the tenant and the land lord in the present case are the husband and wife. 10. In such circumstance, this Court does not find any reason to sustain Ext.P8 order and the same is set aside. The CJM shall hear the parties in the CMP and take appropriate decision, in accordance with law, within a period of one month from the date of receipt of a certified copy of this judgment and after hearing the parties. The writ petition would stand allowed. No costs. Sd/- ## **K. VINOD CHANDRAN, JUDGE** // true copy // SB/06/02/2017 P.A to Judge