Dismissed

K K Srikanth v. Indian Overseas Bank

DRAT11 Dec 2024REGULAR APPEAL/94/2024

Case brief

AI extract

What is this about?

The Tribunal dismissed the appellant's appeal challenging his status as a tenant in sufferance. Relying on Supreme Court precedents, the court held that since the lease expired before the SARFAESI notice, the appellant had no protection, and the lower order was confirmed.

What did the court decide?

Appeal R.A(S.A):94/2024 dismissed; order of DRT-III confirmed; parties bear own costs.

K K Srikanth versus Indian Overseas Bank — Contract and Commercial Disputes | DRAT (2024)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 11^th of December, 2024

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PRESENT: Hon’ble Mr. Justice G. Chandrasekharan CHAIRPERSON

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R.A(S.A):94/2024

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(SA No. 677/2024 on the file of DRT-III, Chennai))

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Between

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Mr. K.K. Srikanth (Aadhar No. 6770 8923 2535) Son of Mr. Krishnananda Gupta,

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Plot A. Kazura Garden 1^st Main Road, 3^rd Cross Street, Neelankarai,

Chennai – 600 041.

… Appellant

And

The Chief Manager & Authorised Officer, Indian Overseas Bank, Purasaiwalkam Branch,

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No.15, Hunters Road, Purasaiwakam,

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Chennai – 600 112.

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Mr. Vakisan, Son of Mr. Subramanian,

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No. 10, Beeman Street, Kennady Garden, 1^st Main Road,

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Lawspet, Puducherry – 605 004.

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Mrs. Deivanai,

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Wife of Mr. Subramanian, No. 10, Beeman Street, Kennady Garden, 1^st Main Road, Lawspet, Puducherry – 605 004. ( R2 and R3 are given up)

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… Respondents Counsel for Appellant : Mr. V. Jayachandran Counsel for 1^st Respondent : M/s. V. Rajeswari

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ORDER

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This Appeal is filed against the order dated 03.10.2024

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in SA 677/2024 on the file of DRT -III, Chennai.

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Learned Counsel for Appellant submitted that the equitable mortgage by deposit of title deeds was created by the borrower in favour of 1^st Respondent Bank, on 20.08.2020. Thereafter, the Appellant entered into a registered Lease Agreement with borrower, on 14.09.2020. On 14.10.2024, the borrowers sent a letter to the 1^st Respondent Bank stating about the registered lease dated 14.09.2020, for the period of 3 years, in favour of the Appellant. The lease expired with effect from 30.09.2023. Through this letter, the borrowers have also expressed their intention to settle the loan on receiving their offer of Rs.3 Crores. He further submitted that, the letter was not replied by 1^st Respondent Bank. It is further submitted that in a challenge to the order of the Learned CJM, Chengalpat, in CMP No. 2601/2024, claiming the tenant’s right in respect of

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property mortgaged, his Application was disposed of as not maintainable, relying on the judgement of Hon’ble Supreme Court in the case of Hemraj Ratnakar Salian Vs. HDFC Bank Ltd., reported in AIR 2021 SC 3880 . Appellant’s lease had come into existence even prior to the issuance of Demand Notice under Section 13(2) of the SARFAESI Act, 2002, and thus, he is entitled for protection. He prayed for some time either for buying the property or for vacating the property.

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In response, Learned Counsel appearing for the 1^st Respondent Bank submitted that, the lease was created subsequent to the execution of mortgage by deposit of title deeds. Only if the possession is taken and the property is vacant, the sale can be held effectively. DRT has given 45 days time for vacating the property, but, without doing so, this Appeal is filed without any merits. The rights of tenant to protect the possession is settled by Hon’ble Supreme Court

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in Bajarang Shyamsunder Agarwal v. Central Bank of India & Anr. , reported in 2019 (9) SCC 94.

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Considered the rival submissions and perused records.

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Even as per the admitted case of the Appellant, the registered lease deed, in favour of Appellant, in respect of mortgaged property, was registered only on 14.09.2020, subsequent to the execution of equitable mortgage by deposit of title deeds, by the borrowers in favour of 1^st Respondent Bank, on 20.08.2020. According to the Learned Counsel for Appellant, the lease is for the period of three years from 14.09.2020, and thus, the lease expired in September, 2023. We are in 2024. As rightly held by Hon’ble Supreme Court in Hemraj Ratnakar Salian Vs. HDFC Bank Ltd., reported in AIR 2021 SC 3880, the Appellant, who is “tenant in sufferance” is not entitled any protection under Rent Act, as there is no renewal of the tenancy after September, 2023.

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6. In Bajarang Shyamsunder Agarwal v. Central Bank of

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India & Anr., reported in 2019 (9) SCC 94, the Hon’ble Supreme Court, crystallized the right of a tenant vis-à-vis the SARFAESI Act. It is held in para 25 as follows:-

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“25. In our view, the objective of SARFAESI Act,

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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 65−A 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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As per this judgement, only if the tenancy came into existence

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prior to the mortgage, tenant’s possession cannot be disturbed by taking possession of the property. The lease has to be determined in accordance with Section 111 of TP Act. If

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a tenancy 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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The case on hand is that, the Lease Deed came into

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existence after execution of equitable mortgage and prior to

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the issuance of Demand Notice under Section 13(2) of SARFAESI Act, 2002. The lease expired in September, 2023, and the Appellant is only a ‘tenant in sufferance’. As per dictum laid down in Hemraj Ratnakar Salian Vs. HDFC Bank Ltd., reported in AIR 2021 SC 3880, ‘tenant in sufferance’ , is not entitled for any protection.

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In this view of the matter, this Tribunal finds that there is no illegality and irregularity in the order passed by Tribunal below. Accordingly, order dated 03.10.2024 in SA 677/2024 by DRT-III, Chennai, is confirmed.

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