The Tribunal dismissed an appeal by a tenant against SARFAESI proceedings. It held the bank held a first charge due to a prior mortgage and the tenant has no locus standi or rights superseding the SARFAESI Act.
Appeal dismissed; impugned judgment and order of DRT-1 Hyderabad confirmed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA
Appeal No. 294 of 2018
(Arising out of SA No. 59 of 2012 in DRT-1 Hyderabad)
THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON
…Appellants
-Versus-
| 2. | Sri Mohd. Sadiq. S/o Shaik Imran, Quilla Chourastha, Nizamabad. |
Occ Govt. Teacher, R/o 10-09-13, |
|---|---|---|
| … Respondent | ||
| Counsel for the Appellants | Nemani Srinivas, Learned Advocate |
|
| Counsel for the Respondent | Mr. Debarshi Das with Ms. Antara Biswas, Learned Advocate |
|
| JUD | GMENT : |
On 26thSeptember, 2023 |
THE APPELLATE TRIBUNAL
Instant appeal has been preferred against a judgment and order dated 08.09.2018 passed by Learned DRT -1 Hyderabad dismissing the SARFAESI Application No. 59 of 2012.
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2. As per the pleadings of the parties, SARFAESI Application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the Act) was filed by the Appellant stating that he is a 3rd party to the proceedings. Respondent No. 2 namely Mohd. Sadiq is the owner of the secured assets while the Appellant is a tenant. Appellant advanced a loan of Rs. 3 lacs to Respondent No. 2 on 13.02.2005 on executing a promissory note. Appellant is paying rent to the Respondent No 2. Respondent No. 2 issued a letter of authorization in favour of the Appellant on 18.02.2005. A Civil Suit for recovery of money and for attachment of the property is also pending. 3. On 20.01.2012, Respondent No. 1 visited and threatened the Appellant to vacate the premises. No notice was issued either to the Appellant or Respondent No. 2. There are interim orders of the Civil Court existing over the property in dispute. Hence, all the SARFAESI actions initiated by the Bank are liable to be set aside.
4. Respondent Bank contended that a Home Loan of Rs.5.75 lacs was sanctioned in favour of the Respondent No. 2. He created an equitable mortgage on 15.01.2005 by depositing the title deeds of the secured assets. There were defaults in repayment of the loan amount. Accordingly, it was classified as NPA. Bank was well within its rights to proceed under the SARFAESI Act. Sale Notice was issued on 04.10.2010 fixing the date of auction as 22.12.2010. Bank also proceeded under Section 14 of the SARFAESI Act. The
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alleged transaction between the Appellant and Respondent No. 2 are subsequent to the creation of mortgage. Hence, first charge is in favour of the Bank.
5. Having considered the submissions made by the Learned Counsel for the parties and perusing the record, Learned DRT recorded a finding that the Bank has a first charge over the secured assets. Alleged Home Loan by the Appellant in favour of the Respondent No. 2 is subsequent to the creation of mortgage. Bank has also proceeded under Section 14 of the SARFAESI Act. Accordingly, SARFAESI Application was dismissed.
6. Heard the Learned Counsel for the parties and perused the record.
7. Admittedly equitable mortgage was created by the Respondent No. 2 in favour of Respondent No. 1 on 15.01.2005. Alleged loan was given by the Appellant to the Respondent No. 2 on 13.02.2005. It is evidently clear that the alleged loan was given by the Appellant after the date of mortgage. Bank has first charge over the secured assets. Section 13(13) of the SARFAESI Act reads as under:
(13) No borrower shall, after receipt of notice referred to in subsection (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.”
8. Admittedly, the equitable mortgage was created by Respondent No. 2 in favour of Respondent No. 1 on 15.01.2005 which is prior to the date of alleged loan given
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by the Appellant to the Respondent No. 2 on 13.02.2005. Appellant is trying to take the benefit of alleged loan on the ground that he is paying the rent out of fruits of the loan amount. Some Civil suit is also pending which has no bearing over the SARFAESI action initiated by the Bank. Accordingly, in view of Section 13(13) of SARFAESI Act, no prior written consent of the secured creditor was obtained. Further, no rent note or tenancy agreement is on record. Further, even if any such alleged tenancy rights are there, provisions of SARFAESI Act would supersede the provisions of Transfer of Property Act as has been held by the Hon’ble Apex Court in Bajarang Shyamsunder Agarwal v. Central Bank of India (2019) 9 SCC 94, wherein reliance was placed upon a judgment of the Vishal N. Kalsaria case) (2016) 3 SCC 762, wherein in Para 24.2 it was held that-
“if a tenancy under law comes into existence after creation of mortgage, but prior to the issuance of notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65A of the Transfer of Property Act.”
Accordingly, Appellant has no right to challenge the SARFAESI action initiated by the Bank.
9. Orders passed by the District Magistrate under Section 14 of the SARFAESI Act were also challenged before the Learned DRT.
10. I have gone through the record and I found that no illegality is committed by the District Magistrate in passing the order under Section 14 of the SARFAESI Act. All the compliances are duly made. Accordingly, I do not find any
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illegality or irregularity in the orders passed by Ld. District Magistrate on 06.11.2011.
11. On the basis of discussion made above, I am of the view that the Appellant has no locus standi to challenge the SARFAESI action initiated by the Bank. Accordingly, Appeal lacks merit and is liable to be dismissed.
ORDER
Appeal is dismissed. Judgment and order passed by DRT-1 Hyderabad dated 08.09.2018 is confirmed.
No order as to costs.
File be consigned to Record Room.
Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.
Copy of the Judgment/ Final Order be uploaded in the Tribunal’s Website.
Order signed and pronounced by me in the open Court on this the 26th day of September, 2023.
(Anil Kumar Srivastava,J) Chairperson
Dated: 26th September, 2023 tp
2 issues framed by the court
Whether the appellant as a tenant has locus standi to challenge SARFAESI action by the bank when the loan was granted after the creation of mortgage in favor of the bank.
Whether Section 13(13) of the SARFAESI Act validates the SARFAESI proceedings despite the alleged tenancy rights of the appellant.
Colour shows how this judgement treated each authority
Bajarang Shyamsunder Agarwal v. Central Bank of IndiaRelied on¶23
(2019) 9 SCC 94 · Who else cites this
Vishal N. KalsariaRelied on¶23
(2016) 3 SCC 762 · Who else cites this
4 provisions across 2 enactments
Smt. K. Annapurna
Union Bank of India
Sri Mohd. Sadiq
Anil Kumar Srivastava
As recorded by the court registry
12 orders share this CNR
Judgements on the same questions, provisions and authorities, from every court
