Allowed

PNB Housing Finance Ltd. v. Shree Venkateswara Realcon Pvt. Ltd.

DRAT13 Oct 2023MISC APPEAL/20/2023

Case brief

AI extract

What is this about?

Appellant preferred appeal against DRT order granting time to file opposition and staying proceedings in a SARFAESI application filed by a tenant who was not a party to the proceedings. Bench held that stay granted without reason was illegal and appeal is allowed.

What did the court decide?

Impugned order allowing time to file opposition and granting stay is set aside. Tenant directed to decide application under Section 17.

PNB Housing Finance Ltd. versus Shree Venkateswara Realcon… — Company and Corporate | DRAT (2023)

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Misc. Appeal No. 20 of 2023-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Misc. Appeal No. 20 of 2023

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(Arising out of S.A. 139 of 2022 in DRT-III, Kolkata)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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PNB Housing Finance Limited, having its office at 7, Kyd Street, 5^th Floor, Kankaria Mansion, Kolkata 700 016;

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The Authorised Officer, PNB Housing Finance Limited, having its office at 7, Kyd Street, 5th Floor, Kankaria� Mansion, Kolkata 700 016.

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… Appellants

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-Versus-

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M/S Shree Venkateswara Realcon Pvt. Ltd. office at 1^st Floor, Premises No. 1 Allenby Road, P.S. Bhawanipore, near Forum Mall, Kolkata 700 020;

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M/s. Transtek Solution Private Limited, 1st Floor, Premises No. 1 Allenby Road, P.S. Bhawanipore, near Forum Mall, Kolkata 700 002;

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Mr. Anshuman Bagri residing at 16B, Judges Court Road, Alipore, Kolkata - 700 027;

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M/s. Chaska Reloaded, represented by one of its partners namely Mr. Sarwar Hossain, residing at 58/A Lower Range, Kolkata 700 019.

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… Respondents

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Counsel for the Appellant … Mr. Arnab Basu Mullick Counsel for Respondent No.4/ M/s. Chaska Reloaded … Mr. Dhiman Ray Mr. Pritam Modak

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JUDGMENT : 13^th October, 2023

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THE APPELLATE TRIBUNAL :

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Appellant, PNB Housing Finance Limited, preferred the appeal against an order dated 8^th August, 2023 passed by Learned DRT-III, Kolkata in S.A. 139 of 2022. 2. As per the pleadings of the parties, Respondent No. 4, M/s. Chaska Reloaded,represented through its partner, namely, Mr. Sarwar Hossain, is neither a Borrower nor a

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Misc. Appeal No. 20 of 2023-DRAT-Kolkata Guarantor of the Appellant; rather Respondents No. 1, 2 and 3 are Borrowers and Guarantors of the Appellant.

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3. Respondents No. 1 to 3 preferred an application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as ‘the Act’) against the Appellant challenging the notice under Section 13 (2) of the Act and the Possession Notice dated 2^nd December, 2021. Pending hearing of the SARFAESI Application, Respondent No. 4, M/s. Chaska Reloaded, through one of its partners, namely Sarwar Hossain, moved an application before the Learned DRT being I.A. 2011 of 2023 for stay of operation of the order passed by District Magistrate, South 24 Parganas under Section 14 of the Act on the ground that the Respondent No. 4 is a tenant in the secured assets. Tenancy rights would prevail over the mortgaged property; this fact was within the knowledge of the Financial Institution at the time of sanctioning the loan. Sarwar Hossain, is carrying on business in the premises since 2015 on the basis of tenancy agreement and regularly paying rents. The Appellant had issued a notice on 19^th July, 2023 that it will take possession of the secured assets on 2^nd August, 2023. 4. Learned DRT vide impugned order allowed the time to file opposition to the Financial Institution, i.e. the Appellant, and stayed the proceedings till the next date of hearing. Feeling aggrieved Appellant preferred the appeal.

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I have heard the Learned Counsel for Appellant as well as Respondent No. 4 and perused the record.

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Misc. Appeal No. 20 of 2023-DRAT-Kolkata 5. Learned Counsel for Appellant would submit that Respondent No. 4 was not a party in the SARFAESI proceedings. Respondent No. 4 did not move any application for impleadment. Without being impleaded as party, he moved an application for interim relief which was granted without any ground. It is further submitted that Respondent No. 4 is represented as M/s. Chaska Reloaded through one of its partners, Sarwar Hussain, which shows it is a partnership firm. But the registration certificate is not filed nor any assertion is made regarding this fact. Accordingly, it shall be presumed that it is an unregistered partnership firm which cannot sue, as provided under Section 69 of the Partnership Act. It is further submitted that notice was given to the Borrower by the Appellant and possession is also taken by the Appellant. Hence the I.A. 2011 of 2023 has become infructuous.

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6. It is further submitted that as per the tenancy agreement dated 4^th December, 2015 it was a tenancy for five years but the lease agreement is unregistered this period expired in 2020. Thereafter fresh lease agreement was executed on 4^th December, 2020 for a period of five years. It was well within the knowledge of the Respondent No. 4 that the property is under mortgage but no consent of the Appellant was taken.

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7. Per contra, Learned Counsel for Respondent opposed the appeal and submitted that although possession has been taken by the Appellant but it was taken illegally. Section 12A of the West Bengal Premises Tenancy Act, 1997

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Misc. Appeal No. 20 of 2023-DRAT-Kolkata protects the rights of Respondent No. 4 wherein it precedes the provisions of the SARFAESI Act. Learned Counsel has placed reliance upon a judgment of the Hon’ble Apex Court in Vishal N. Kalsaria -vs- Bank of India & Others (2016 3 SCC 762).

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8. Admittedly, SARFAESI Application under Section 17 of the Act was filed by Respondents No. 1, 2 and 3, who are Borrowers and Guarantors of the Appellant. Respondent No. 4 is not a party in the proceedings. No prayer for impleadment as Respondent is made in I.A. 2011 of 2023. If the Respondent No. 4 was aggrieved by any action of the Appellant then he could have contested the SARFAESI proceedings by getting him impleaded in the SARFAESI Application. Or if his rights are adversely affected, he should have filed an application under Section 17 of the Act, if law permits. But neither any application for impleadment was filed nor any application under Section 17 of the act is filed, hence the application filed by Respondent No. 4 itself is not maintainable.

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9. Respondent No. 4 claims himself to be a tenant of the secured asset. He is claiming his right on the strength of the tenancy agreement dated 4^th December, 2015 which was renewed on 4^th December, 2020. As far as determination of rights of Respondent No. 4 are concerned, it is to be noted that initially the tenancy agreement dated 4^th December, 2015 expired in 2020. Thereafter, a fresh agreement was executed. Loan was given in the year 2017. This fact was well within the knowledge of the Respondent No. 4.

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Misc. Appeal No. 20 of 2023-DRAT-Kolkata Respondents No. 1, 2 and 3 are party to the lease agreement but no consent of the Financial Institution was obtained when the lease was renewed 4^th December, 2020.

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10. It would appear from the dates that earlier the tenancy was with effect from 4^th December, 2015 to 3^rd December, 2020 and was renewed from 4^th December, 2020 to 3^rd December, 2025. During this period, notice under Section 13 (2) of the Act was also issued but no written instruction from the Financial Institution, as required under Section 13 (13) of the Act, was obtained.

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11. The Hon’ble Apex Court in Bajarang Shyamsunder Agarwal -vsCentral Bank of India & Another [(2019) 9 SCC 94] in paragraph 24 held that:

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“24. In our view, the objective of the SARFAESI Act, coupled with the TP Act and the Rent Act are required to be reconciled herein in the following manner:

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24.1. 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.

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24.2. 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 TP Act.

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Misc. Appeal No. 20 of 2023-DRAT-Kolkata 24.3. 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 TP Act.”

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Further in paragraph 32 it was held that:

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“32. 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 the TP 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 30-4- 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.”

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12. This fact is not disputed that possession of the secured assets have been taken by the secured creditor as Appellant. Accordingly, I am of the considered opinion that the grant of stay by the Learned DRT without assigning any reason suffers from material illegality. Accordingly, appeal is liable to be set aside. Appeal deserves to be allowed.

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O R D E R

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Appeal is allowed. The impugned order 8^th August, 2023 passed by Learned DRT-III, Kolkata in S.A. 139 of 2022, to an extent that stay is granted till the next date of hearing, is set aside.

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Misc. Appeal No. 20 of 2023-DRAT-Kolkata

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I.A. 2011 of 2023 be decided by the Learned DRT in accordance with law.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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File be consigned to Record room.

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Order dictated, signed and pronounced in open Court. Copy of the Judgment/Final Order be uploaded in the Tribunal’s Website.

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