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CHEQUE BOUNS CASE

Under this SARFAESI Act , the bank need not to file eviction petitions or evictions suit against the tenants of the secured property =At this juncture it would also be pertinent to deal with the submissions of the learned counsel Mr. Sharma that the respondent-Bank i.e. the secured creditor could not have ousted the petitioner-tenant of the mortgaged property without taking recourse to the remedy available under the Rajasthan Rent Control Act. Apart from the fact that the provisions of the said Act have the effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force, in view of Section 35 of the said Act, the secured creditor could not have approached the rent Tribunal seeking possession of the mortgaged property as under Section 18 of the Rajasthan Rent Control Act, the Rent Tribunal has jurisdiction to hear and decide the petitions relating to the disputes between landlord and tenant and matters connected therewith ancillary thereto filed under the provisions of the Rent Act. This being neither the dispute between the landlord and the tenant, nor the proceedings having been filed under the provisions of the Rent Act, and there being specific powers conferred upon the secured creditors to take measures under Section 13(4) of the said Act to recover the secured debt, the question of respondent-Bank filing suit for eviction against the tenants of the mortgaged property under the provisions of the Rent Act does not arise. The said Act being the Central Act having the effect of overriding other State Laws in view of Section 35 of the said Act, this court does not find any force in the submission of learned counsel Mr. Sharma that the respondent-Bank was required to approach the Rent Tribunal seeking possession of the disputed premises and could not have taken the possession of the said premises under Section 13(4) of the said Act. While dealing with the similar contention as raised by Mr. Sharma in this petition, the Delhi High Court in case of Sanjeev Bansal Vs. Oman International Bank SAOG, 2006 (4) BC, 299 (DB), held interalia that the protection afforded by the Rent Control Act to a tenant is from the landlord of the premises and that such protection is not available against the mortgagee who seeks to enforce his right under the SARFAESI Act. The court further held that if the lease was created in contravention of Section 65-A of the Transfer of Property Act, by the mortgagor in favour of the lessee, neither the mortgagor nor the lessee can claim any protection to defeat the right of the mortgagee.

IN THE HIGH COURT OF JUDICATURE FOR RAJ. AT JAIPUR BENCH, JAIPUR.

Jaipur Rajasthan India

Jaipur Rajasthan India (Photo credit: Wikipedia)

S.B. CIVIL WRIT PETITION NO. 999/2011

OM PRAKASH SHUKLA — PETITIONER
VS.

(1) STATE BANK OF BIKANER AND JAIPUR HAVING ITS REGISTERED AND PRINCIPAL OFFICE AT TILAK MARG, ‘C’ SCHEME, JAIPUR.
(2) SHRI GOPAL LAL SAINI
(3) SMT.SATYABHAMA AGARWAL — RESPONDENTS

Date of Judgment:- 6TH MARCH,2012.

HON’BLE MS. JUSTICE BELA M. TRIVEDI

Mr. Jayant Sharma, for the petitioner,
Ms. Anita Agrawal, for the respondents,

BY THE COURT
(1) In the instant petition, the petitioner who happens to be an Advocate by profession, has challenged the action of the respondent No. 1 Bank in issuing the public notice dated 25.11.2010, inviting tenders for the sale of the property being the House No. 1555, Choura Rasta, Chokdi Modi Khana, Jaipur, to be held on 28.11.11 under the provisions contained in the securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(hereinafter referred to as the said Act)and the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘the said Rules’).
(2) It has been alleged in the petition that the petitioner was occupying part of the said premises as tenant since last many years, however, the officers of the respondent Bank had put lock on the said premises and now have invited tenders for the sale of said property through public auction. The petitioner has prayed for the following reliefs in the petition:-
“i) the impugned Public Auction scheduled to be conducted on 28th of December, 2010 through the public notice/proclamation(Annex-6) by the Respondent No. 1 may kindly be declared as arbitrary, illegal unconstitutional, and against the law and consequently, may kindly be quashed so far as it affects the rights and premises of the petitioner; and

ii)respondents be directed to restore the possession of the petitioner on the disputed premises; and be also directed not to put up any hurdles in running the office in the premises in question either themselves or through their administrators, assigns, servants or authorized representatives in any manner; and

iii)the Hon’ble Court may kindly pass such other order or a direction which it may deem fit, just and proper in the facts and circumstances of the present case, in favour of the petitioner.

iv)The costs through out be also awarded in favour of the petitioner.”

(3) It appears that when the matter was placed for admission hearing, the Court on 11.2.2011, had issued notice to the respondents and directed that in the meantime, petitioner shall not be dispossessed from the rented premises. It may be noted that when the petitioner had sought for the relief of restoration of possession of the disputed premises, as he was already dispossessed as per the allegations made by him in the petition, the ex-parte direction not to dispossess him appears to have been given inadvertently. As such it was the duty of the learned counsel for the petitioner to point out to the Court that the petitioner was already dispossessed from the disputed premises.
(4) On the notices having been served, the petition was opposed by the respondent No.1-Bank by filing reply raising preliminary objection as to the maintainability of the petition and also disputing the tenancy rights of the petitioner. It was also contended that the auction notice was published in the news paper on 25.11.2010 after taking all the steps to recover the secured debt as per the provisions contained in the said Act.
(5) It is pertinent to note that respondent No.3 Smt. Satyabhama Agarwal, the borrower and the mortgagor who had mortgaged the disputed premises with the respondent No.1 bank to secure the repayment of the loan taken by her from the bank, has chosen to remain absent though duly served with the notice in this petition.
(6) It has been sought to be submitted by learned counsel Mr. Jayant Sharma, for the petitioner that the petitioner being an advocate by profession was running his office in the disputed premises since 1982 and his tenancy rights were sought to be jeopardized when the respondent No. 1 locked the said premises, which was part and parcel of House No. 1555 Chaura Rasta Chowkari Modikhana, Jaipur. According to Mr. Sharma, the respondent No. 1 could not have dispossessed the petitioner without following the due process of law. Mr. Sharma has relied upon the judgment of Karnataka High Court in Hutchison Essar South Limited v. Union Bank of India and another reported in AIR 2008 Karnataka 14 and in case of M/s Nitco Roadways Private Ltd. & Ors. v. Punjab National Bank, reported in AIR 2011 KARNATAKA 27, to buttress his submission that the Creditor/Bank could take only symbolic possession from the tenants invoking the provisions of the said Act and that the tenant could not be thrown out by the Secured Creditor/Bank without following the due process of law.
(7) On the other hand, the learned counsel Ms. Anita Agrawal for the respondent No.1 Bank, has vehemently submitted that the petition contains highly disputed questions of facts in as much as there was no document produced by the petitioner to show that he was the tenant of the respondent No.3 borrower in the disputed premises, when the respondent no.3 had created the mortgage in favour of the respondent Bank in the year 1996. According to her, the respondent bank had already taken over the possession of the disputed premises after taking measures under Section 13(4) of the said Act and that if the petitioner was aggrieved by the said measures taken by the bank in respect of the said mortgaged premises, the petitioner could have filed appeal in view of Section 17 of the said Act. Thus, according to Ms. Agrawal, there being an alternative, efficacious remedy available to the petitioner, the petitioner was not entitled to any relief in the petition, invoking extra ordinary jurisdiction of this court. Pressing into service, provisions contained in Section 35 of the Said Act, Ms. Agrawal submitted that the provisions of the said Act had an over-riding effect over the other law for the time being in force and that the validity of the said Act having also been upheld by the Apex Court, the petitioner could not challenge the action of the respondent taken under the said Act. She also submitted that the bank had already taken over the possession of the disputed premises, as admitted by the petitioner himself in the petition and had sought restoration of possession, however the Court had passed the ex-parte interim order on 11.2.2011 to the effect that the petitioner shall not be dispossessed from the rented premises. According to her when the petitioner was already dispossessed as per his own averments in the petition, such an order not to dispossess the petitioner from the rented premises had no meaning.
(8) At the out set, it may be stated that though the petitioner had come with the allegations in the petition stating that he was dispossessed from the disputed premises by the respondent No.1 and his possession was required to be restored, the learned counsel for the petitioner could not have submitted and prayed before the Court, when the matter was placed for admission hearing on 11.2.2011, not to dispossess the petitioner. As rightly submitted by learned counsel Ms. Agrawal for the respondent bank, such an ex-parte interim order not to dispossess the petitioner would not have any meaning or effect when he was already dispossessed on the date of filing of the petition even as per his own averment.
(9) There is also much force in the argument of Ms. Agrawal for the respondent No.1 Bank that the petitioner though has claimed tenancy rights in respect of the disputed premises, he has not produced any document worth the name to show that the premises in question was already let out by the respondent No. 3 Smt. Satyabhama Agrawal to the petitioner when she had mortgaged the said property with the respondent No.1 bank towards the security of the loan taken by her. The petitioner has produced the copies of certain letters addressed by third party to him mentioning the address of the disputed premises, which are of the year from 1985 to 1992. Apart from the fact that such letters do not establish any right much less tenancy rights of the petitioner, they related to the year prior to the date of mortgage which had taken place in the year 1996. The copy of notice produced at Annexure 5, allegedly addressed by one advocate named Man Mohan Lal Sharma to the petitioner also does not appear to be genuine one. Even otherwise, such copies of some letters written by third parties would not establish the tenancy rights of the petitioner in the disputed premises. It is also pertinent to note that there is no document worth the name produced by the petitioner to show that he was in possession of the disputed premises at the time of and after the mortgage was created by the respondent No.3 in favour of the respondent No. 1 bank, either in the capacity of tenant or otherwise. As rightly submitted by learned counsel Ms. Agrawal for the respondent bank, since the petition involves highly disputed questions of facts as regards the tenancy rights of the petitioner with regard to disputed premises, the petition, invoking extra-ordinary jurisdiction under Art. 226, 227 of the Constitution of India, could not be entertained.
(10) It may also be noted that as held by the Apex Court in the case of S.P. Chengalvaraya Naidu v. Jagannath (AIR 1994 S.C. 853), the petitioner is bound to produce all the documents relevant to the petition and with-holding of relevant documents would amount to suppression of material facts and fraud with the Court. The petitioner in the instant petition having not produced the relevant documents to show his rights in the disputed premises and having sought to challenge the public notice Annexure 6 issued under the provisions contained under the said Act and the rules made thereunder, the Court has reason to believe that the petition has been filed as proxy litigation at the instance of respondent No. 3 to frustrate the recovery proceedings against the respondent No. 3. Such practice deserves to be strongly deprecated, and the present petition deserves to be dismissed on such ground alone.
(11) So far as the maintainability of the petition is concerned, it would be relevant to reproduce certain provisions of the said Act. Section 13 deals with the enforcement of security interest created in favour of the secured creditor. Section 13(4) of the said Act empowers the secured creditor to take recourse to any one or more of the measures mentioned therein to recover his secured debt, in case the borrower fails to discharge his liability in full within the specified time limit. The relevant part of Section 13(4) of the said Act reads as under:-
“Section 13(4).– In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-

(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset;

(b) ……
(c) ……
(d) ……”

(12) Section 17 of the said Act enables any aggrieved person to make application to the Debts Recovery Tribunal having jurisdiction, against any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor. Section 34 of the said Act bars the jurisdiction of the Civil Court to entertain any suit or proceedings in respect of the matter which Debts Recovery Tribunal or the Appellate Tribunal is empowered to determine. Section 35 of the said Act provides that the provisions of the Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. From the bare reading of the said provisions, it clearly emerges that the petitioner, if aggrieved by the coercive measures taken by the respondent bank under Section 13(4) of the said Act, had the remedy to apply to the Debts Recovery Tribunal having jurisdiction. Hence there being alternate efficacious remedy provided under the said Act, the petition is liable to be dismissed on the said ground also.
(13) It was also sought to be submitted by the learned counsel Mr. Sharma for the petitioner that the respondent-Bank could have taken only the symbolic possession of the disputed premises and not the actual physical possession while taking measures under Section 13(4) of the said Act. There is also no force in the said submission of the learned counsel Mr. Sharma in view of the position of law settled by the Apex Court in case of M/s. Transcore Vs. Union of India & Anr. AIR 2007 SC 712 wherein the Apex Court dismissing the plea of symbolic possession, categorically held that the dichotomy between symbolic and physical possession does not find place in the said Act. The relevant para Nos. 55 and 56 of the said judgment are reproduced as under :-
“55. The word possession is a relative concept. It is not an absolute concept. The dichotomy between symbolic and physical possession does not find place in the Act. As stated above, there is a conceptual distinction between securities by which the creditor obtains ownership of or interest in the property concerned (mortgages) and securities where the creditor obtains neither an interest in nor possession of the property but the property is appropriated to the satisfaction of the debt (charges). Basically, the NPA Act deals with the former type of securities under which the secured creditor, namely, the bank/FI obtains interest in the property concerned. It is for this reason that the NPA Act ousts the intervention of the courts/ tribunals.

56. Keeping the above conceptual aspect in mind, we find that Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under a liability, has failed to discharge his liability within the period prescribed under Section 13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realizing the secured assets. Section 13(4-A) refers to the word “possession” simpliciter. There is no dichotomy in sub-section (4-A) as pleaded on behalf of the borrowers. Under Rule 8 of the 2002 Rules, the authorised officer is empowered to take possession by delivering the possession notice prepared as nearly as possible in Appendix IV to the 2002 Rules. That notice is required to be affixed on the property. Rule 8 deals with sale of immovable secured assets. Appendix IV prescribes the form of possession notice. It inter alia states that notice is given to the borrower who has failed to repay the amount informing him and the public that the bank/FI has taken possession of the property under Section 13(4) read with Rule 9 of the 2002 Rules. Rule 9 relates to time of sale, issue of sale certificate and delivery of possession. Rule 9(6) states that on confirmation of sale, if the terms of payment are complied with, the authorised officer shall issue a sale certificate in favour of the purchaser in the form given in Appendix V to the 2002 Rules. Rule 9(9) states that the authorised officer shall deliver the property to the buyer free from all encumbrances known to the secured creditor or not known to the secured creditor. (emphasis supplied). Section 14 of the NPA Act states that where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred, the secured creditor may, for the purpose of taking possession, request in writing to the District Magistrate to take possession thereof. Section 17(1) of NPA Act refers to right of appeal. Section 17(3) states that if the DRT as an appellate authority after examining the facts and circumstances of the case comes to the conclusion that any of the measures under Section 13(4) taken by the secured creditor are not in accordance with the provisions of the Act, it may by order declare that the recourse taken to any one or more measures is invalid, and consequently, restore possession to the borrower and can also restore management of the business of the borrower. Therefore, the scheme of Section 13(4) read with Section 17(3) shows that if the borrower is dispossessed, not in accordance with the provisions of the Act, then the DRT is entitled to put the clock back by restoring the status quo ante. Therefore, it cannot be said that if possession is taken before confirmation of sale, the rights of the borrower to get the dispute adjudicated upon is defeated by the authorised officer taking possession. As stated above, the NPA Act provides for recovery of possession by non-adjudicatory process, therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous. Rule 8, undoubtedly, refers to sale of immovable secured asset. However, Rule 8(4) indicates that where possession is taken by the authorised officer before issuance of sale certificate under Rule 9, the authorised officer shall take steps for preservation and protection of secured assets till they are sold or otherwise disposed of. Under Section 13(8), if the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the creditor before the date fixed for sale or transfer, the asset shall not be sold or transferred. The costs, charges and expenses referred to in Section 13(8) will include costs, charges and expenses which the authorised officer incurs for preserving and protecting the secured assets till they are sold or disposed of in terms of Rule 8(4). Thus, Rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under Rule 9. Till the time of issuance of sale certificate, the authorised officer is like a court receiver under Order XL Rule 1 CPC. The court receiver can take symbolic possession and in appropriate cases where the court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorized officer under Rule 8 has greater powers than even a court receiver as security interest in the property is already created in favour of the banks/FIs. That interest needs to be protected. Therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorized officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third party interests are created overnight and in very many cases those third parties take up the defence of being a bona fide purchaser for value without notice. It is these types of disputes which are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules.”
(14) Thus, the said decision of the Apex Court clinches the issue to the effect that the dichotomy between the symbolic possession and physical possession does not find place in the said Act and that the security interest in the property created in favour of the Banks/FIS needs to be protected, when the measures have been taken by the banks under Section 13(4) of the said Act. The ratio of the above judgment was also followed by the Madras High Court in case of Sree Laxmi Products Vs. State Bank of India (supra).
(15) At this juncture it would also be pertinent to deal with the submissions of the learned counsel Mr. Sharma that the respondent-Bank i.e. the secured creditor could not have ousted the petitioner-tenant of the mortgaged property without taking recourse to the remedy available under the Rajasthan Rent Control Act. Apart from the fact that the provisions of the said Act have the effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force, in view of Section 35 of the said Act, the secured creditor could not have approached the rent Tribunal seeking possession of the mortgaged property as under Section 18 of the Rajasthan Rent Control Act, the Rent Tribunal has jurisdiction to hear and decide the petitions relating to the disputes between landlord and tenant and matters connected therewith ancillary thereto filed under the provisions of the Rent Act. This being neither the dispute between the landlord and the tenant, nor the proceedings having been filed under the provisions of the Rent Act, and there being specific powers conferred upon the secured creditors to take measures under Section 13(4) of the said Act to recover the secured debt, the question of respondent-Bank filing suit for eviction against the tenants of the mortgaged property under the provisions of the Rent Act does not arise. The said Act being the Central Act having the effect of overriding other State Laws in view of Section 35 of the said Act, this court does not find any force in the submission of learned counsel Mr. Sharma that the respondent-Bank was required to approach the Rent Tribunal seeking possession of the disputed premises and could not have taken the possession of the said premises under Section 13(4) of the said Act. While dealing with the similar contention as raised by Mr. Sharma in this petition, the Delhi High Court in case of Sanjeev Bansal Vs. Oman International Bank SAOG, 2006 (4) BC, 299 (DB), held interalia that the protection afforded by the Rent Control Act to a tenant is from the landlord of the premises and that such protection is not available against the mortgagee who seeks to enforce his right under the SARFAESI Act. The court further held that if the lease was created in contravention of Section 65-A of the Transfer of Property Act, by the mortgagor in favour of the lessee, neither the mortgagor nor the lessee can claim any protection to defeat the right of the mortgagee.
(16) Mr. Sharma for the petitioner had relied upon the judgmentsof the Karnataka High Court, however said judgments have no application to the facts of the present case in as much as in both the cases, the question of the concerned petitioners being the tenants was not in dispute, which is very much disputed in the instant case as set- out herein above. That apart, in the case of Hutchison Essar South Ltd.(supra), the Karnataka High court has held interalia that if the secured asset is in the possession of the borrower, its possession can be taken in accordance with the provisions contained under Sections 13 and 14 of the Securitisation Act. If the borrower has inducted somebody overnight only to defeat the rights of the bankers, then also the provisions of Sections 13 and 14 of the Securitisation Act can be pressed into service for taking the possession . In the instant case, neither the possession of the petitioner nor the tenancy rights of the petitioner have been established. Even otherwise, as held by the Apex Court in case of M/S Transcore (supra), the dichotomy between the symbolic and physical possession does not exist in the said Act and that the Security interest created in favour of the Banks/Financial Institutions needs to be protected, when the measures have been taken by the Banks under Section 13(4) of the said Act, read with the said Rules.
(17) In view of the above, there being no merits in the petition, the same deserves to be dismissed. Since the Court has found that the petition has been filed by the petitioner suppressing material facts by not producing the vital documents, and as proxy litigation at the instance of the respondent No. 3 , with a view to stall the recovery proceedings undertaken by the respondent No. 1 bank against the respondent no. 3 in respect of the disputed premises, the petition deserves to be dismissed with costs , which is quantified at Rs. 5,000/-. The petitioner shall pay the said cost to the respondent No. 1 bank, within two weeks from today. The petition stands dismissed accordingly.

(Bela M.Trivedi)J.

IJ/MRG.
All corrections made in the judgment/order have been incorporated in the judgment/order being emailed.

M.R. Gidwani
PS-cum-J

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