Dismissed

Girish Mansata v. Tata Capital Finance Servises Ltd. and Ors.

DRAT3 Oct 2024REGULAR APPEAL/51/2024

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal dismissed an appeal by a tenant challenging a DRT order that rejected his SARFAESI application under Section 17. The Tribunal held that an unregistered lease for a term exceeding one year could not grant protection, and an expired lease rendered the tenant a trespasser.

What did the court decide?

The appeal was dismissed and the impugned Judgment and Order of the DRT were affirmed.

Girish Mansata versus Tata Capital Finance Servises Ltd. and… — Banking and Recovery | DRAT (2024)

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Reportable/Non-Reportable

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Appeal No. 51 of 2024-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Appeal No. 51 of 2024

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(Arising out of S.A. 125 of 2019 in DRT-III, Kolkata)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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Girish Mansata, son of late Popatlal Mansata, residing at 74/2, Chakraberia Road (North), Kolkata – 700 020, P.S. Ballygunge.

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… Appellant

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-Versus-

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Tata Capital Financial Services Limited, 2/5/1, Hindusthan Road, Kolkata 700 029;

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Authorised Officer, Tata Financial Services Limited, 2/5/1, Hindusthan Road, Kolkata – 700 029;

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Mrs. Asha Kaushik, 3B, Mandeville Garden, Kolkata - 700 019. … Respondents

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Counsel for the Appellant … Mr. Arijit Bardhan Mr. Soumyajit Mishra Counsel for Respondents No. 1 & 2 … Mr. Nimish Mishra Mr. Avishek Guha Mr. Somraj Naskar Mr. Ankit Chatterjee Ms. Ritika Pal

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JUDGMENT : 3^rd October, 2024

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THE APPELLATE TRIBUNAL :

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Instant appeal has arisen against a judgment and order dated 21^st June, 2019, passed by Learned DRT-III, Kolkata dated 23^rd December, 2019 dismissing S.A. 125 of 2019, (Girish Mansata -vs- Tata Capital Financial Services Limited & Others).

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2. As per the pleadings of the parties, the SARFAESI Applicant, Girish Mansata, filed an application under Section 17 of the SARFAESI Act, 2002 wherein he is neither a

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Appeal No. 51 of 2024-DRAT-Kolkata

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Borrower, nor Guarantor nor a party to the SARFAESI Proceedings. He entered into a Lease Agreement with the Respondent No. 3, Mrs. Asha Kaushik, who is the absolute owner of Flat No. 41 at 4^th Floor, 24A, Shakespeare Sarani, Kolkata - 700 017. A Lease Deed was executed on 13^th June, 2016 with the assertion that the lessee shall pay the monthly license fee of Rs. 10,000.00 extendable after three years to Rs. 17,250.00. Security Deposit of Rs.2.04 lac was made. Lease Agreement was for seventy two months commencing from 1.7.2016 to 30^th June, 2022. An Amenities Agreement was also executed on 18^th May, 2016 with M/s Kaushik Realcon Private Limited for a monthly charge of Rs. 50,000.00 for initial period of three years and thereafter, Rs.74,750.00. Appellant is engaged in Paying Guest House business. A Possession Notice was affixed by the Bank for taking possession of the Flat then the Appellant filed the SARFAESI Application. Written statement was filed by the Respondents No. 1 and 2 stating that the notices were issued under the SARFAESI Act. No irregularity could be shown by the Appellant. Lease Agreement is not a registered agreement which is violative of Section 17 (d) as well as Section 49 of the Indian Registration Act. Agreement was prepared only to hatch conspiracy to delay the possession proceedings undertaken by the Financial Institution.

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3. Respondent No. 3 filed an affidavit with the statement that she wants to settle the matter with the Financial Institution. Certain irregularities were also raised by her in the SARFAESI Proceedings.

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Appeal No. 51 of 2024-DRAT-Kolkata

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4. Learned DRT recorded its finding that since the Lease Deed is an unregistered document, created for more than one year, it could not be said to be a valid tenancy under the law. Accordingly, dismissed the SARFAESI Application. 5. Heard the Learned Counsel for the parties and perused the record. 6. Respondent No. 3 is the owner of the Flat in question who had availed loan from the Respondent Bank to the tune of Rs.2,43,00,000.00 on 21^st March, 2017. Loan Agreement was executed on 26^th March, 2017. Equitable mortgage was created by depositing title deeds. There was default in payment of loan and the account was classified as N.P.A. on 7^th August, 2018. Demand Notice was issued on 7^th September, 2018 for outstanding dues of Rs.2,52,82,118.00. Possession Notice was issued on 27^th November, 2018 which was affixed on the disputed Flat which is under challenge.

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7. A title suit No. 838 of 2016 was also filed by one Parijat Housing Estate Society, which is the allotted flat is in favour of Respondent No. 3, for the relief of injunction restraining the Respondent No. 3 from using the flat for the purpose of Paying Guest House business. 8. Appellant claims himself to be a tenant of the secured asset who sought protection from eviction by filing the SARFAESI Application. 9. Opposition filed by the Financial Institution before the Learned DRT stating that the notices were issued in

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Appeal No. 51 of 2024-DRAT-Kolkata

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accordance with the SARFAESI Act. There is no irregularity, as alleged in the SARFAESI Application. Lease agreement is not a registered Agreement which is against law as lease of any property, beyond one year, needs to be registered. Section 49 of the Registration Act creates a bar for treating lease agreement as evidence. Respondent No. 3 also filed an affidavit before the Learned DRT that they wanted to settle the matter with the Financial Institution. Learned DRT after hearing the Learned Counsel for the parties and perusing the record held that the Appellant seeking relief on the basis of an unregistered lease agreement is not permissible under the law. Accordingly, SARFAESI Application was dismissed. Feeling aggrieved, Appellant preferred the appeal.

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10. Learned Counsel for Appellant would submit that Appellant is a tenant in the secured assets on the basis of a Lease Deed. Learned DRT erred in holding that an unregistered lease cannot continue beyond a year while parties to the lease, agrees for the same which was a valid tenancy. Further ground is taken that once tenancy is created, tenant can only be evicted by following due process of law. Financial Institution has no right to initiate eviction proceedings against the Appellant. It is further submitted that Section 3 of the West Bengal Premises Tenancy Act, 1997 mandates that nothing in the Act would apply to any premises let out for non-residential purpose carrying more than Rs.10,000.00 as monthly rent. It is further submitted

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Appeal No. 51 of 2024-DRAT-Kolkata that Appellant is entitled to protect his possession by virtue of tenancy in the secured assets.

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11. Per contra, Learned Counsel for Respondent, Financial Institution, submits that the Appellant is claiming his right on the basis of an unregistered Agreement of Lease which is against the law. It is further submitted that even the lease period has expired. Possession of the Appellant is of trespasser after expiry of the period of lease.

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12. Appellant is claiming to be a tenant on the basis of a Lease Deed executed between the Appellant as well as Respondent No. 3 on 13.6.2016. It was for a period of 72 months commencing from 1.7.2026 to 30^th June, 2022. Monthly licence fee was fixed at Rs.10,000.00. On the basis of this document Appellant is claiming to protect his possession. At the very outset, it is to be observed that the period of tenancy had already expired on 30^th June, 2022. There is no record to show that the tenancy period was extended by the parties.

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13. In Bajrang Shyam Sunder Agarwal Versus Central Bank of India and another (2019) 9 SCC 94 the Hon’ble Apex Court held that the SARFAESI Act will override the provisions of Transfer of Property Act. Hon’ble Apex Court has distinguished implications of a registered and an unregistered instrument/ oral agreement in the case of Harshad Govardhan Sondagar versus International Assets Reconstruction Company Limited and others (2014) 6 SCC 1 and quoted with approval Para no. 36 of Harshad Govardhan Sondagar (supra) which reads as under:

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Appeal No. 51 of 2024-DRAT-Kolkata

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“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 bona fide lessees of the secured assets. We find that in the case 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 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.”

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14. In Para 24 of the Bajarang Shyamsunder Agarwal -vsCentral Bank of India and another (supra), Hon’ble Apex

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court held that –

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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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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. Iin 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

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Appeal No. 51 of 2024-DRAT-Kolkata

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asset for more than the period prescribed under Section 107 of the TP Act.”

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15. Further, Hon’ble Apex Court in Para No. 27 held that –

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“The claim of tenancy made by the Appellant tenant is not supported by a registered instrument. We recognize the legal position, as laid out in Vishal N. Kalsaria case, that in the absence of a written lease deed the tenant may prove his existing rights by producing other relevant evidence before the Magistrate. The appellant tenant has to produce evidence of payment of rent, property taxes, etc. Furthermore, if the rent and permitted increases were payable, then the quantum ought to have been mentioned. In addition to the above, the claim of tenancy could have been substantiated by relying upon other tax receipts such as BMC tax, water tax, electricity charges consumed by the tenant, etc. However, the appellant tenant has only submitted xerox copies of rent receipts.”

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16. In the present case, the tenancy was allegedly created on 1.7.2016. It was for 72 months. Admittedly, the agreement is an unregistered agreement. Learned Counsel for the Appellant would submit that under the West Bengal Premises Tenancy Act, a tenancy can be created without executing a registered agreement. I could not accept the submission made by the Learned Counsel as in view of the law laid down by the Hon’ble Apex Court in Bajarang Shyamsunder Agarwal versus Central Bank of India and another (supra), wherein it has specifically been held that if any of the tenants claims that he is entitled to possession of a secured assets for a term of more than a year, it has to be supported by the execution of a registered document. It was further held that in the absence of a registered instrument, if the tenant relies upon an unregistered instrument accompanied by delivery of possession, the tenant is not entitled to possession of the secured assets for more than the period prescribed under Section 107 of the

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Appeal No. 51 of 2024-DRAT-Kolkata Transfer of Property Act. No evidence is adduced or is on record to show or prove that the Appellant is in possession over the secured assets. No evidence of payment of property taxes etc. is on record. Further, the claim of the tenancy could have been substantiated by relying upon other tax receipts such as water tax, electricity charges or other payments made by the Appellant in respect of the secured assets. But no such material is brought on record which could have proved the Appellant’s possession. Accordingly, it cannot be held that the Appellant was in possession over the secured assets as a tenant.

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17. Appellant cannot take advantage of an unregistered Lease Deed. Lease term expired on 30^th June, 2022. There is nothing on record to show that this period was further extended by the parties. After the expiry of the period of lease, the status of the Appellant would become ‘tenant in sufferance’. Hon’ble Apex Court in Bajarang Shyamsunder Agarwal (supra) held that lease tenants do not have any legal rights and are akin to trespassers.

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18. Learned Counsel for Appellant has also placed reliance upon a judgment in R.V. Bhupal Prasad Vs. State of A.P. (1995) 5 SCC 698 wherein it was held that-

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8. “Tenant at sufferance” is one who comes into possession of land by lawful title, but who holds it, by wrong after the termination of the term or expiry of the lease by efflux of time. The tenant at sufferance is, therefore, one who wrongfully continues in possession after the extinction of a lawful title. There is little difference between him and a trespasser.”

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19. On the basis of the discussion made above, I am of the considered view that no illegality or irregularity is committed

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Appeal No. 51 of 2024-DRAT-Kolkata by the Learned DRT in passing the impugned order. Appeal lacks merit and is liable to be dismissed.

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O R D E R

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The appeal is dismissed. The judgment and order dated 21^st June, 2019, passed by Learned DRT-III, Kolkata dated 23^rd December, 2019 in S.A. 125 of 2019 (Girish Mansata - vs- Tata Capital Financial Services Limited & Others), is affirmed.

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No order as to costs.

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File be consigned to Record room.

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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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Copy of the Judgment/Final Order be uploaded in the Tribunal’s Website.

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Order dictated, signed, and pronounced in open Court.

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(Anil Kumar Srivastava,J) Chairperson