Dismissed

Gireesh Babu v. City Union Bank Limited

DRAT12 Nov 2024MISC APPEAL/31/2024

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal dismissed the appeal against the dismissal of a stay petition. It held that a registered lease executed after the issuance of Section 13(2) notice is null and void under Section 13(13) of the SARFAESI Act without creditor consent.

What did the court decide?

Appeal MA (SA) 31/2024 was dismissed and the impugned order dated 3.2.2020 was confirmed.

Gireesh Babu versus City Union Bank Limited — Cheque Dishonour | DRAT (2024)

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 12^th day of November, 2024

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PRESENT: HON’BLE MR. JUSTICE G. CHANDRASEKHARAN CHAIRPERSON

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MA(SA) 31/2024

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( arising out of IA No.1652/2019 in SA 316/2019 On the file of DRT-2, Ernakulam)

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Between

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GireehBabu

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S/o Gomathi, Business, Revathi Nivas, TC KP 9/977, Peroorkala Thevukonamkara, Trivandrum Taluk.

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…..Appellant

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And

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1. City Union Bank Ltd., Corporate Office, Gandhi Nagar, Kumabakonam 612 001.

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2. The Branch Manager, City Union Bank Ltd., Blue Tower, Power House Road, Trivandrum 695 036.

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3. Gigi Salim

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W/o Salim Mathews, No.527, Darsan Nagar, Vazhayila, Kudapanakunnu, Trivandrum.

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…..Respondents

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Counsel for appellant : Shri T. Kamala Kannan Counsel for R1 & R2 : Mr. N. Somasundaar& Ms. N. Geetha

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R3 is set ex parte

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ORDER

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This appeal is filed under Section 18 of SARFAESI Act, as against the order dated 3.2.2020 in IA 1652/2018 in SA 316/2018 passed by Ld. Presiding Officer, DRT-2, Ernakulam. The said SA was filed against the order dated

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24.9.2019 passed by Ld.CJM, Thiruvananthapuram in CMP No.3759/2018 in MC 723/17 and IA 1652/2018 in the said SA was filed to stay all further proceedings.

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Ld. Counsel for appellant submitted that the appellant entered into a lease deed of the mortgaged property through an unregistered lease deed dated 30.11.2013 and thereafter the said lease was extended through a registered

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lease deed for a period of 3 years on 4.11.2014. It is further submitted that the appellant was thus protected by the unregistered and registered lease deeds, therefore, there cannot be a proceedings under SARFAESI Act and

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under the circumstances, the proceedings initiated by the Ld. CJM, Thiruvananthapuram is illegal. Aggrieved by the said order, said SA was filed

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along with along with astay petition.It is further submitted that Tribunal

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below, without considering the merits involved in the case proceeded to

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dismiss the IA 1652/2018 in SA 316/2018.

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In reply, Ld. Counsel for respondents 1 & 2 submitted that admittedly lease deed dated 30.11.2013 is an unregistered lease deed and before the registered lease deed was entered into on 14.11.2014, demand notice under Section 13(2) under SARFAESI Act was issued on 24.10.2014. It is further submitted that Section 13(13) of SARFAESI Act prohibits the borrower that “no borrower shall, after receipt of notice referred to in sub-section (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.”

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That apart, it is submitted that in ground (L) of grounds of appeal, it is stated that “In an admitted tenancy matter, moreover, registered document and continuing tenancy and further for 10 years, the finding of the Tribunal is illegal” which means tenancy was agreed for 10 years. It is stated that this is hit by Section 65(A) of Transfer of (Properties)Act which prohibits for entering into a tenancy registered for a period of more than 3 years.

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In conclusion, Ld. Counsel for respondents 1 and 2 relied upon the decision laid by Hon’ble Supreme Court of India in re,BajarangShyamsunder Agarwal Vs. Central Bank of India and others, reported in AIR 2019 SC 5017, wherein Hon’ble Supreme Court of India has clearly laid down the preposition with regard to the right of a tenant against the proceedings initiated under SARFAESI Act. Therefore, SA 316/2018 filed under SARFAESI Act has no locu s

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to stand and Ld. Presiding Officer, DRT-II, Ernakulam rightly dismissed the

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said IA and prayed for dismissal of the appeal.

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Ld. Counsel for respondents 1 and 2 also relied upon the following decisionin

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support of his argument.

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a) Hemraj Ratnakar Salian Vs. HDFC Bank Ltd and others reported in AIR 2021 SC 3880

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No representation for R3. R3 is called absent and set exparte.

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I have considered the rival submissions and perused the records.

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From the facts narrated above, the admitted position is that there was an unregistered lease deed dated 30.11.2013 in favour of the appellant in respect of the mortgaged property and there was also a demand notice issued under Section 13(2) of SARFAESI Act dated 24.10.2014. After receiving this Notice, a registered lease deed was executed in favour of the

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appellant in respect of the mortgaged property on 4.11.2014.

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As rightly pointed out by Ld. Counsel for respondents 1 and 2 that this lease deed dated 4.11.2014 is hit by Section 13(13). It is useful to extract the said section for ready reference, which is as follows:

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(13) No borrower shall, after receipt of notice referred to in sub-section (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.

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This section makes it clear that borrower should not enter into a lease in

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respect of secured asset referred in Section 13(2) notice without prior

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consent from the secured creditor. Admittedly, there is no writtenconsent obtained from the secured creditor for entering into the so called registered lease deed on 4.11.2014. Moreover, it is not clear from the lease deed dated 4.11.2014 produced before me whether it is for 3 years or 10 years. Therefore, I am not inclined to get into the validity of the lease deed under

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Section 65A of Transfer of Property Act.

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Be that as it may, Hon’ble Supreme Court of India has laid down the law with regard to the right of a tenant available in re, BajarangShyamsunder Agarwal Vs. Central Bank of India and others, reported in AIR 2019 SC 5017, .referred above and in other cases. It is useful to refer to relevant paragraph.

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

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a) 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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b) 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 65A of the T.P. Act.

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c) 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 T.P. Act.”

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In Vishal N. Kalsaria Vs. Bank of India and others reported in (2016) 3 SCC 762, it is held, as follows:

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“In view of the above legal position, if we accept the legal submissions made on behalf of the Banks to hold that the provisions of SARFAESI Act override the provisions of the various Rent Control Acts to allow a Bank to evict a tenant from the tenanted premise, which has become a secured asset of the Bank after the default on loan by the landlord and dispense with the procedure laid down under the provisions of the various Rent Control Acts and the law laid down by this Court in catena of cases, then the legislative powers of the state legislatures are denuded which would amount to subverting the law enacted by the State Legislature. Surely, such a situation was not contemplated by the Parliament while enacting the SARFAESI Act and therefore the interpretation sought to be made by the learned counsel appearing on behalf of the Banks cannot be accepted by this Court as the same is wholly untenable in law.”

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It is seen from records that registered lease deed has been entered on

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4.11.2014, subsequent to the creation of registered mortgage and issuance

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of Section 13(2) Notice under SARFAESI Act on 24.10.2014, therefore, it is

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hit by Section 13(13) of SARFAESI Act, 2002. The unregistered lease deed dated 30.11.2013 though is for more than three years, in the absence of registration of lease beyond one year , no protection can be afforded. Even

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otherwise, unregistered lease deed was executed on 30.11.2013 and we

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are now in the year 2024 and at best, protection can be afforded for one

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year and that period has since expired long back.

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Taking into consideration the proposition laid down in the judgment of Hon’ble Supreme Court of India and the discussion held above, this Tribunal is of the view that stay petition i.e., IA 1652/2019 filed by the appellant in

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SA No.316/2018 is rightly dismissed by Tribunal below and it needs no interference from this Tribunal.

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Accordingly, the order dated 3.2.2020 passed in IA 1652/2018 in SA 316/2018 is hereby confirmed and Appeal MA (SA) 31/2024 is dismissed. Ld. Presiding Officer, DRT-II, Ernakulam is directed to dispose of SA 316/2018 as expeditiously as possible and in accordance with law.

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Parties are directed to bear their own costs. Pending IAs, if any stand closed.

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[Dictated to Steno(SN), transcribed by him, corrected, signed and pronounced by me in open court, this 12^th November, 2024)

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Sd/(JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON

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Gireesh Babu v. City Union Bank Limited

Case brief

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Gireesh Babu v. City Union Bank Limited

Case brief

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