V.R. Sivan v. Authorised Officer, Federal Bank Ltd.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON** ## **THURSDAY, THE 4TH DAY OF DECEMBER 2014/13TH AGRAHAYANA, 1936** ## **WP(C).No. 31508 of 2014 (K)** **----------------------------------------** ## **PETITIONER(S):** **-----------------------** **V.R. SIVAN, AGED 60 YEARS S/O.RAMANKUTTY, VATTATHARA, NJARAKKAL.** **BY ADV. SRI.N.K.MOHANLAL** ## **RESPONDENT(S):** **-------------------------** ## **1. AUTHORISED OFFICER** **FEDERAL BANK LTD, SAMC THRISSUR, (KKD ZONE) 380/6, IX, T.B ROAD S.T NAGAR, THRISSSUR 680 001.** ## **2. ELAVARASSY JAYAKANTH** **W/O.JAYAKANTH, PADIVUKOTTAM HOUSE NEAR OLD INDUS IND WORKSHOP, ALUVETTUVAZHI KOORKANCHERRY P.O, THRISSUR 680 007.** ## **3. JAYAKANTH** **PADIVUKOTTAM HOUSE, NEAR OLD INDUS IND WORKSHOP ALUVETTUVAZHI, KOORKANCHERRY P.O, THRISSUR 680 007.** **R1 BY ADVS . SRI.A.ANTONY SMT.LEELAMMA ANTONY R2 & 3 BY ADV. SRI.T.A.SHAIN** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 04-12-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **PJ** **WP(C).No. 31508 of 2014 (K) ----------------------------------------** ## **APPENDIX** **PETITIONER(S)' EXHIBITS ------------------------------------EXHIBIT P1. COPY OF THE RENT DEED. EXHIBIT P2. COPY OF THE ORDER DATED 20.05.13 ISSUED BY PRESIDING OFFICER OF HONOURABLE RECOVERY TRIBUNAL COURT, ERNAKULAM. EXHIBIT P3. COPY OF THE LAST PAID RENT RECEIPT DATED 01.11.14. EXHIBIT P4: ORGINAL COPY OF THE RENTAL RECEIPT DATED 10/1/2009. RESPONDENT(S)' EXHIBITS --------------------------------------NIL. / TRUE COPY / P.S. TO JUDGE** **PJ** **'CR'** ## **P.R. RAMACHANDRA MENON, J.** ======================== W.P.(C). No. 31508 of 2014 -------------------------------------------Dated this the 4th day of December, 2014 ## **JUDGMENT** The petitioner is a tenant of the building over which security interest was created by the borrower in favour of the respondent Bank, at the time of availing a loan. The borrower turned to be a defaulter, when the Bank proceeded with steps under the SARFAESI Act. The petitioner immediately approached the DRT, Ernakulam by filing S.A. No. 402 of 2013 contending that, he is in occupation of the premises as a tenant and that the respondent Bank is not justified in proceeding with steps without giving him an opportunity to put forth his version. It is also stated that, the DRT, Ernakulam had originally granted a stay, but subsequently, it came to be vacated. This made the petitioner to approach this Court by filing the writ petition. 2. Heard the learned counsel for the petitioner as well as Sri. A. Antony, the learned counsel for the respondent Bank. 3. According to the petitioner, he is a tenant of the building W.P.C. No. 31508 of 2014 -2- bearing door No.1/31(old) of Trissur Corporation, where 2nd and 3rd respondents were residing earlier. The building belongs to the 2nd respondent lessor which stands mortgaged to 1st respondent for a housing loan and a business loan availed in the year 2010. It is stated that the tenancy was created in the year 2009 for a period of eleven months, which was being continued. Later, a fresh rent deed was executed on 01.11.2011 as borne by Ext.P1 agreeing to pay the rent as specified therein. In view of the coercive steps taken by the Bank against the 2nd respondent/lessor, the petitioner approached the DRT, Ernakulam by filing S.A. No. 402/2013 and an interim order of stay was obtained. Subsequently, it came to be vacated holding that the DRT was having no jurisdiction to deal with the case filed by a tenant in view of the ruling rendered by the Apex Court in **Harshad Govardhan Sondagar v. International assets Reconstruction Company Limited and Others** (2014) 6 SCC 1 and hence the writ petition. 4. The learned counsel for the petitioner points out that, the legal position stands declared by the Apex Court, as to the course of action to be pursued by secured creditors in cases involving tenancy, as per the judgment reported in **Harshad** W.P.C. No. 31508 of 2014 -3- **Govardhan Sondagar v. International assets** **Reconstruction Company Limited and Others** (2014) 6 SCC 1. It has been categorically stated that, Banks cannot take the law into their hands and forcefully evict a tenant, merely with reference to the provisions of the SARFAESI Act. The Apex Court observed that, the non obstante clause under Section 17 of the Act will come into operation, only when any other provision of law stands inconsistent to the provisions of the SARFAESI Act. After elaborate discussion, the Apex Court also held that the right of a lessee to continue to occupy the premises, even after creation of a mortgage, is not otherwise dealt with by the SARFAESI proceedings and hence, two types of leases will stand recognized, to have the benefit to the extent as specified therein. The first one, in respect of leases created prior to the mortgage, and the second one, in respect of leases created after mortgage. 5. Section 13(13) of the Act stipulates that, after service of notice under Section 13(2), no borrower is supposed to effect any conveyance/alienation with regard to the property concerned. The learned counsel points out that, the course of action open to the Bank i.e, secured creditor, is to affix a notice in the premises under Rule 8(1) of the relevant Rules; upon which it will be open W.P.C. No. 31508 of 2014 -4- for the tenant either to vacate the premises or to resist the eviction by producing necessary materials to justify the continued occupation. If the eviction is resisted, the next course of action for the Bank is to file an application before the concerned CJM Court under Section 14 of the SARFAESI Act, along with an affidavit, also giving particulars of the tenant and then, it will be for the CJM/competent authority to consider the matter after issuance of notice to the tenant and to proceed with further steps accordingly. The observations made by the Apex Court in paragraph '28'; relevant portion of which sought to be relied on from the part of the petitioner, is as follows: “xxxxxx 28. A reading of sub-rules (1) and (2) of Rule 8 of the Security Interest (Enforcement) Rules, 2002 would show that the possession notice will have to be affixed on the outer door or at the conspicuous place of the property and also published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorised officer. At his stage, the lessee of an immovable property will have notice of the secured creditor making efforts to take possession of the secured assets of the borrower. When, therefore, a lessee becomes aware of the possession being taken by the secured creditor, in respect of the secured asset in W.P.C. No. 31508 of 2014 -5- 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 office 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 65-A 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 the 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 65-A of the Transfer of Property act and that the lease has not been determined in W.P.C. No. 31508 of 2014 -6- 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 65-A 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.” The learned counsel for the petitioner submits that, instead of filing a proper petition before the concerned CJM showing the particulars of tenancy, the Bank sought to take law into their hands. It is also stated in paragraph '6' that, an Advocate Commissioner was got appointed by the respondent Bank, who served a notice to the petitioner for taking over physical possession of the property. The Advocate Commissioner came to the premises and threatened the petitioner on 22.11.2014, to effect vacant surrender, lest physical possession should be taken over forcefully on 26.11.2014. 6. After hearing both the sides and after going through the judgment rendered by the Apex Court, it is no more ' _res integra'_ as to the course of action that is to be pursued. By virtue of the W.P.C. No. 31508 of 2014 -7- specific observation in paragraph '28' of the verdict cited supra, if the eviction is resisted by the tenant in occupation, it is open for the Bank to file proper proceeding before the CJM Court, with an affidavit as to the particulars of tenancy, upon which it will be for the CJM to pass appropriate orders in the manner as specified by the Apex Court. The question to be considered in this case is, whether any relief can be extended to the petitioner with reference to the course ordered to be pursued by the Apex Court. In this context, the factual position as to the tenancy, to the undisputed extent, as averred by the petitioner with reference to the pleadings and materials produced, are to be looked into. 7. Ext.P1 is the rent deed dated '1.11.2011' executed between the petitioner and the lessor for a period of '11 months'. There is a recital in Ext.P1 that, such tenancy was being continued right from '10.01.2009' and rent was being paid accordingly. In order to substantiate the said fact, the petitioner has produced some additional document along with I.A. No. 16699 of 2014 as Ext.P4, which is the original of a rent receipt dated 10.01.2009, stated as issued by the lessor. According to the petitioner, he is a continuing tenant from January 2009 onwards. But there is no registered lease deed. It is true that, W.P.C. No. 31508 of 2014 -8- the lease is not liable to be compulsorily registered, if it is for a period less than one year. The necessity to have a registered document, with reference to the relevant provisions of Transfer of Property Act, is relevant in this context. Section 107 of the said Act reads as follows: “ **Sec.107. Leases how made** - A lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee: Provided that the State Government may from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.” 8. Incidentally, a look into the Registration Act , 1908 is also relevant. Section 17 of the said Act deals with documents which are compulsorily to be registered, the relevant extent of which is extracted below: W.P.C. No. 31508 of 2014 -9- ## “ **Sec.17. Documents of which registration is** **compulsory:** - (1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866 (20 of 1866), or the Indian Registration Act, 1871 (7 of 1871) or the Indian Registration Act, 1877 (3 of 1877), or this Act came to comes into force, namely”:- (a) instruments of gift of immovable property; (b) other non-testamentry instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property; (c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of creation, declaration, assignment, limitation or extinction of any such right title or interest; (d) **leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent** ; and xxxxxxxx” ( _emphasis supplied_ ) 9. The effect of non-registration of a document, which otherwise is liable to be compulsorily registered, is dealt with under Section 49(c) of the said Act in the following terms: “Sec.49(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: W.P.C. No. 31508 of 2014 -10- Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877), or as evidence of any collateral transaction not required to be effected by registered instrument.” 10. Admittedly, Ext.P1 lease deed produced by the petitioner was only for a period of '11 months' and the tenure is already over. Even if the case of tenancy is accepted, the continued occupation could only be on the basis of monthly tenancy. Now, coming to the rights of such a tenant, the observation made by the Apex Court in paragraph '36' of the judgment cited supra is very relevant, which reads as follows: ## xxxxxxx 36. We may now consider the contention of the respondents that some of the appellants have not produced any document to prove that they are bonafide lessees of the secured assets. We find that in the cases before us, the appellants have relied on the written instruments or rent receipts issued by the landlord to the tenant. Section 107 of the Transfer of Property Act provides that a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made “only by a registered instrument” and all other leases of immovable property may be made either by a registered instrument or by oral agreement W.P.C. No. 31508 of 2014 -11- accompanied by delivery of possession. Hence, if any of the appellants claim that they are entitled to possession of a secured asset for any term exceeding one year from the date of the lease made in his favour, he has to produce proof of execution of a registered instrument in his favour by the lessor. Where he does not produce proof of execution of a registered instrument in his favour and instead relies on an unregistered instrument or oral agreement accompanied by delivery of possession, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, will have to come to the conclusion that he is not entitled to the possession of the secured asset for more than a year from the date of the instrument or from the date of delivery of possession in his favour by the landlord.” 11. In the above circumstance, the petitioner, since does not have a case that he is having a registered document to establish the tenancy, but for Ext.P1 rent deed and Ext.P3 rent receipt, he comes in the ' **other category** ' dealt with by the Supreme Court in paragraph '36'. In the case of such persons, the course pointed out by the Apex Court with reference to any unregistered instrument or oral agreement accompanied by delivery of possession, _the Chief Metropolitan Magistrate or the District Magistrate, as the case may be,_ _**will have to come to the conclusion that he is not entitled to the possession of the secured asset for more than a year from the date of**_ W.P.C. No. 31508 of 2014 -12- ## _**the instrument or from the date of delivery of possession in his favour by the landlord.**_ 12. In other words, the benefit which could be extended to persons like the petitioners who are having unregistered lease deed is, only to an extent of the cooling period or breathing time for 'one year' from the date of the instrument or from the date of delivery of possession. Delivery of possession in the instant case is admittedly from '10.1.2009' and the period of one year is already over as the lease was only for a period of 11 months. This being the position, no further relief can be reasonably aspired or obtained by the petitioner from the CJM Court in view of the specific ruling rendered by the Apex Court; holding that the learned Magistrate has no other option. This Court finds that, there is absolutely no merit or bonafides in the writ petition and the same is dismissed accordingly. 13. In view of the submission made by the learned counsel for the petitioner that, the petitioner might be given some breathing time to make alternate arrangements, considering the particular facts and circumstances, this Court finds that some reasonable time can be granted to the petitioner to effect vacant surrender. In the above circumstance, the petitioner is permitted W.P.C. No. 31508 of 2014 -13- to continue in the premises till 30th of this month and vacant surrender shall be effected on the next day i.e., on 31st of this month. An affidavit shall be filed within 'one week' before the respondent Bank in this regard. Continuation of the petitioner in the premises till 30.12.2014 shall be subject to execution of the affidavit as aforesaid. **P.R. RAMACHANDRA MENON, JUDGE.** kp/-