Dismissed

Mess National Engineers v. Phoenix Arc Pvt. Ltd.

DRT23 Jun 2023SA/23/2022

Case brief

AI extract

What is this about?

The Tribunal dismissed an application filed by a partner of M/S National Engineers seeking to restrain a recoveree from interfering with alleged tenanted premises. The applicant failed to prove a valid tenancy of the mortgaged asset despite claiming an oral agreement, as he could not produce a registered instrument or receipts. Relying on Supreme Court precedents requiring registered instruments f

What did the court decide?

Securitization Application dismissed; applicant's claim to restrain recovery proceedings on grounds of tenancy rejected.

Mess National Engineers versus Phoenix Arc Pvt. Ltd. — DRT (2023) — LawSathi Research

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DEBTS RECOVERY TRIBUNAL-III, CHANDIGARH

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PRESIDED OVER: SH. MRIDULESH KUMAR SINGH SECURITIZATION APPLICATION NO.23/2022

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Date of Institution: 08.02.2022 Date of Decision: 23.06.2023

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M/S National Engineers, B-21-152/1,497, Industrial Area-B, Ludhiana, Punjab, through its partner Sh. Surinder Pal Singh

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--Applicant

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Versus

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M/s Phonexic ARC Private Limited having its registered office at 5^th floor, Dani Corporate Park, 158, C. S. T. Road, Kalina, Santacruz (E), Mumbai -400098

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Sh. Kulwinder Singh S/o Sh. Sharan Pal Singh

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Smt. Jaspreet Kaur W/o Sh. Kulwinder Singh Both residents of 148-R, Model Town, Ludhiana

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Smt. Balbir Kaur W/o Sh. Sharan Pal Singh R/o 148-L, Model Town, Ludhiana

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Smt. Paramjit Kaur W/o Sh. Harbhajan Singh R/o 149-L, Model Town, Ludhiana

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--Respondents

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Argued by: Sh. Sahil Vashisht, Advocate for Applicant Sh. Rahul Garg, Advocate for Respondent

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FINAL ORDER

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This Securitization Application has been filed on behalf of third party i.e., alleged tenant under Section 17(4A) of the Securitization and Reconstruction of Financial Assets and Enforcement Interest Act 2002 (hereinafter referred to as ‘the Act’ for brevity) for restraining the respondent no. 1 from interfering in the peaceful possession of the tenanted premises of the applicant forming part of the secured asset.

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It is stated in the application that applicant is a partnership firm and Sh. Surinder Pal Singh is one of it’s partner. Applicant was inducted as tenant by the respondent no. 2 and 3 in a shed and room forming part of the property no. B-21-152/1, 497, Industrial Area-B, Ludhiana, in the year 2001.The tenancy was oral coupled with the delivery of possession and initially the rate of rent was 12,500.00 per month which is increased from time to time and presently it is Rs.25,724.00 per month. The applicant has been regularly paying rent to respondent no. 4 and 5 at the asking of the respondent no. 2 and 3. It is further stated that applicant has been running its business of Iron and Steel under the name and style of M/S National Engineers in the tenancy premises. Applicant was earlier registered as a dealer under the Central Sales Tax Act 1956 and certificate of registration was issued which bears the address of the tenancy premises. It is further stated that the applicant was duly registered with GST Department and the Registration Certificate was issued which bears the address of the tenancy premises. Applicant has also been obtaining the required consent from the Punjab Pollution Control Board and the consent letter issued by

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SA 23/2022 2

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the said board bears the address of the tenancy premises. Applicant has also been paying license fee to the Municipal Corporation, Ludhiana since the year 2009-2010 and receipts bears the address of the tenancy premises. It is further stated that a notice dated 12.01.2021 under Section 13(2) of the Act was issued by respondent no. 1 and addressed to respondent no. 2 and 3 was pasted outside the property in question. It was stated in the notice that respondent no. 2 and 3 had availed 2 loans totally Rs.85,00,000.00 which they have defaulted and their account has been declared NPA on 05.12.2019.In the notice respondent no.1 threatened to take possession of the tenancy premises. It is further stated that some days back respondent no.1 had also pasted possession notice under Section 13(4) of the Act dated 27.12.2021 on the property in question. It is further stated that applicant is a tenant in the premises and the tenancy has not been terminated. The applicant’s right are fully protected under the East Punjab Urban Rent Restriction Act 1949 and he cannot be dispossessed by the landlord/owner. It is further stated that applicant’s tenancy was created in the year 2001 and the loan was taken by respondent no. 2 and 3 in the year 2018.

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Reply filed on behalf of respondent no. 1 and it is stated in reply that applicant has filed this SA by suppressing the material facts only to delay the recovery proceedings initiated by the respondent no.1. It is further stated that neither the Mortgager nor even Borrowers told or informed about the tenancy of the applicant. It is further stated that respondent no. 2 and 3 availed the financial facilities from Small Business Fine Credit India Pvt. Ltd. and to secure the financial facility respondent no.2 mortgaged the immovable property, i.e., House-cum-Plot no.497 (Portion) M.C.L. B-21-152/1, measuring 334 square yards, Industrial Area B, Tehsil and District Ludhiana and deposited original title deeds with SBFC. Respondents no. 2 and 3 did not maintain the financial discipline as envisaged in the executed loan documents and consequently loan account pertaining to the loan facility availed by the same had been declared NPA on 05.12.2019. Subsequently the SBFC transferred and assigned aforesaid debt along with the underlying security in favour of the answering respondent. Thus, the same has been entitled to recover the entire amount payable vide deed of assignment dated 28.02.2020. It is further stated that when the said respondent did not come forward for making the payment of the outstanding amount to answering respondent had no option except to initiate SARFAESI Proceedings. It is further stated that after issuance of notice under Section 13(2) of the Act, respondent no.3 has replied the said notice by letter dated 17.03.2021 and denied their liability on the flimsy grounds. Nowhere in the said reply has respondent no.3 ever indicated about creation of purported tenancy. When respondents did not make the outstanding amount as demanded, notice under Section 13(4) of the Act was issued and the said notice was not only served upon the respondent no. 3 and 4 through registered post but was also published in two newspapers i.e., Yug Marg and Ajeet Samachar on 30.12.2021 in compliance of provision of Security Interest (Enforcement) Rules, 2002. The said notice has also been pasted outside the mortgaged

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property. In these circumstances answering respondent, being secured creditor, has every right to recover the outstanding amount with the auction of the mortgaged property and applicant does not have any right to come in the way of securitization proceedings. It is further stated that this application was filed by the applicant in collusion with respondent no. 2 to 4. Applicant has not proved that he is tenant of the said premises. It is further stated that none of the documents received by respondent could show that the part of the mortgaged property was under tenancy of applicant and applicant is not entitled to the reliefs claimed.

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Replication filed by applicant and facts enumerated in application where reiterated and facts mentioned in the reply have been again denied.

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It was argued by Sh. Sahil Vashisht, Advocate that applicant is tenant of the mortgaged property since 2001 on the basis of oral tenancy; that applicant is in possession of the property in question and his tenancy has not been terminated; that his rights are fully protected under the East Punjab Urban Rent Restriction Act 1949.

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Per Contra, Sh. Rahul Garg, Advocate has argued that alleged documents filed by the applicant showing his tenancy are not evidence of tenancy; that respondent no. 2 and 3 never informed respondent no.1 about the tenancy of applicant; applicant is not tenant in the secured asset and he has filed this SA with convenience of respondent no.2 and 3 just to defeat the SARFAESI Proceedings.

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It is admitted fact that defendant no.2 and 3 are the owners of the property in question and they have availed the financial facilities from SBFC in the year 2018 after mortgaging the property in question with SBFC. Later on SBFC has transferred and assigned the debt to Phoenix ARC Pvt. Ltd. respondent no. 1. Applicant is claiming himself as tenant in the property in question from the year 2001.Admittedly there is no rent deed executed by respondent no. 2 and 3 in favour of applicant.

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Hon’ble Apex Court in the case of Hemraj Ratnakar Salian Vs. HDFC Bank Ltd. 2021 Supreme Court 3880 has held as under:

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“The applicant has leased tenancy from 12.06.2012 to 17.12.2018. This is not supported by any registered instrument, therefore, he is not entitled to any protection of the Rent Act”.

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Hon’ble Apex Court in the case Vishal N. Kalsaria Vs. Bank of India and Others AIR 2016 SC 530 has held that if any tenant claims 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.

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Learned Counsel for applicant has argued that provisions of SARFAESI Act do not override the provisions of East Punjab Urban Rent Restriction Act 1949 but Learned counsel for applicant failed to satisfy this tribunal as to whether the property in suit comes in purview of the said Act.

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Sh. Sahil Vashisht, Advocate has argued that tenancy was oral and for unlimited period. Per contra , Sh. Rahul Garg, Advocate has argued that no tenancy for commercial use can be oral and for unlimited period. There is force in the argument

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SA 23/2022

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of respondent no. 1. In the present time no property is supposed to rent out orally and for unlimited period.

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Applicant has stated that rent was paid to the owners since 2001 but no rent receipts issued by owners has been filed. It is alleged that rent was paid to respondent no. 4 and 5 at the instance of respondent no. 2 and 3 but no receipts have been filed issued by respondent no.4 and 5. It is admitted that respondent no. 2 and 3 are owners of the secured asset and there is no evidence to the effect that respondent no 2 and 3 have directed any time to pay the rent to respondent no. 4 and 5. Even the fact of payment of rent was not proved.

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Documents, filed by applicant for proving his tenancy in the property in question, not bears the same and complete address of the mortgaged property. In the circumstances these documents cannot be said and accepted as proof of tenancy of applicant in the mortgaged property.

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It is admitted fact that notice under section 13(2) of the Act was served upon the respondents and representation was made under section 13(3-A) of the Act by respondent no. 3 and the same was disposed of by respondent no.1. Thereafter, notice under section 13(4) of the Act was also issued and also pasted on the secured asset and published in the newspapers as per Rules. Notice under section 13(2) of the Act, which is Annexure R-2, was for the payment of Rs.1,00,01,585.00 which was due as on 11.01.2021. Respondent no. 2 and 3 have not paid the said amount as informed by respondent no.1. There is nothing on the record that respondent no. 2 and 3 have filed any Securitization Application before tribunal or CWP before Hon’ble High Court. It shows that respondent no. 2 and 3 are chronic defaulters and does not want to repay the huge public money and now applicant has come forward with this SA just to defeat the SARFAESI Proceedings.

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Applicant miserably failed to prove their tenancy in the secured asset. No other ground was raised to set aside the SARFAESI Proceedings.

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In the considered opinion of this tribunal this SA is devoid of merits and liable to be dismissed. Resultantly this SA is dismissed.

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Order be uploaded on the official website of this Tribunal and Record be consigned to the record room after due compliance.

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Dated: 23.06.2023

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(MRIDULESH KUMAR SINGH) Presiding Officer DRT-III, Chandigarh

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Order dictated, signed and pronounced by me in the open Tribunal. Dated: 23.06.2023