Dismissed

Ms Velvette International Pharma Products Ltd. v. LIC Housing Finance Ltd.

DRT11 May 2023SA/23/2023

Case brief

AI extract

What is this about?

The DRT-II, Chennai dismissed two Securitization Applications filed by a company alleging it was an innocent lessee. The court held the applicant is an aggrieved person with standing but denied protection of possession because the unregistered lease failed to satisfy tenancy conditions under the Transfer of Property Act.

What did the court decide?

Applications SA No.23 of 2023 and SA No.106 of 2023 dismissed; no reliefs granted to applicant.

Ms Velvette International Pharma Products Ltd. versus LIC… — Banking and Recovery | DRT (2023)

¶1

BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

¶2

Dated this 11^th day of May, 2023

¶3

PRESENT: SHRI T. RAJESH

¶4

PRESIDING OFFICER

¶5

SA No.23 of 2023 & SA No.106 of 2023

¶6

M/s Velvette International Pharma Products Limited Rep. by its Authorised Signatory Mr. Suresh Babu Room No.1, Second Floor No.23, Dr. Ambedkar Road Kodambakkam, Chennai – 600 024 …Applicant in both SAs

¶7

Versus

¶8

M/s LIC Housing Finance Ltd., Rep. by its Authorized Officer Mr. M. Kathireasan Harrington Chambers No.30/1A, block A (1^st Floor) And Block C, Abdul Razak First Street Chennai – 600 015

¶9

Mrs. Sujatha Rajkumar W/o Dr. C.K. Rajkumar No.81/1, G.N. Chetty Road T. Nagar, Chennai – 600 017

¶10

M/s Sujatha Bio Tech Represented by its Partner Sujatha Rajkumar Having office at No.81/1, G.N. Chetty Road T. Nagar, Chennai – 600 017 …Respondents in both SAs

¶11

Counsel for the Applicant : M/s Paul Britto Kumar Counsel for 1^st Respondent : M/s Ramalingam & Associates Counsel for Respondents 2 & 3 : ….

¶12

FINAL ORDER

¶13

These Securitization Applications were filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of

¶14

¶15

Security Interest Act,2002 (SARFAESI Act), herein after been called as SARFEASI Act or the Act as the case be, challenging the e-auction sale notices dated 28.11.2022, fixing the sale on 29.12.2022 and the e-auction sale notice dated 27.1.2023 fixing the e-auction sale on 27.2.2023 respectively. These matters are decided together as the same are arising from one proceedings and the subject matter is one and same.

¶16

The facts of the case as contended by the applicant are as follows: -

¶17

The applicant is a company promoted by Dr. C.K Rajkumar, an ophthalmologist who is having 15 years experience in manufacturing and marketing personal health care products. It is also stated that the director of the company died on 7.10.2020 due to Covid. It is also stated that the applicant purchased 3235 sq. mtrs. of land in Athipet, Ambattur Town ship, Chennai and the same had been used for the production and packing facilities of the Herbal division of the applicant. It is also contended that in course of the development of the business, an extent of 12069 sq.feet at float no.8A, Dr. AmbedkarRoad, Kodampakkam, Chennai was leased out from the 3^rd respondent for 10 years commencing from 1.2.1993, fixing Rs.12,000/- per month for 1^st five years and thereafter at 15,000/- per month. It is further stated that the 3^rd respondent had permitted the applicant to construct a building and also an option to purchase the land at the end of the lease. According to the applicant it is also agreed that if the purchase option was not availed, the 3^rd respondent will pay the cost the superstructure to the applicant. It is also the contention of the applicant that even the electric connection in the premises stand in the name of the applicant and the

¶18

¶19

applicant is in lawful possession of the property. It is also stated that being the above situation an advocate commissioner visited the property. Subsequent enquiries were made by the applicant wherein it is revealed that the 3^rd respondent had in her personal capacity had mortgaged the property for the credit facility availed by the 2^nd respondent from the 1^st respondent. In this regard it is the case of the applicant that the applicant is an aggrieved person and that no notice was issued to the applicant in respect to the measures taken against the property. It is also specifically contended by the applicant that applicant is the owner of the building situated in the property and that the applicant had invested huge amounts for the construction of the building and development. According to the applicant the inclusion of the building in the impugned sale notice vitiates the measures.

¶20

Applicant however admit that the applicant had filed SA .40 of 2020 challenging the earlier sale notice dated 14.1.2020 fixing the sale on 19.2.2020 and the said SA ends up in dismissal. Applicant is also taking specific allegations against the attempts of the 1^st respondent to take possession of the property. In nutshell it is the case of the applicant that by virtue of the mortgage created on 5.4.2017, the 1^st respondent is having no right to proceed against the mortgage property.

¶21

In the grounds to the SA the applicant is reiterating the contentions as taken in the statement of facts. In SA.23 of 2023 the applicant had produced the following documents viz., Prospects of the applicant, 9^th annual report of the applicant, 11^th annual report of the applicant dated 5.3.1997, Memorandum of deposit of title deed dated 3.4.2017, Lease agreement and Sale notices. In

¶22

¶23

SA.106 of 2023 the following additional documents were produced along with the SA viz., Electricity bill, Lease agreement dated 5.3.1997, Lease agreement dated 10.2.2018, Board of resolution and sale notice dated 27.1.2023.

¶24

In SA.23 of 2023 the applicant had filed an additional type set producing various electricity bills and the decision of the Hon’ble Apex Court in “harshad Govardhan Sondagar Vs. Internal .Assets Reconstruction Company Ltd and Others, Kanaiyalal Lalchand Sachdev & Ors. Vs State of Maharashtra & Ors, Bajarang Shyamsunder Agarwal vs. Central Bank of India”.

¶25

The respondent had entered appearance and filed their reply statement on following terms. The so claimed right of the applicant as to their entitlement to be in possession of the property is denied by the respondent. The respondent had pointed out that the tenure of the registered lease, if accepted , is only for 10 years from 15.10.1993. It is also pointed out that the 3^rd respondent had already moved the SA.290 of 2019 which eventually stands dismissed for default on 24.3.2021. The respondent had also given particulars of the credit facility availed by the 3^rd respondent and the attempts made by them to get the loan regularized. The respondent had also contended that in earlier SA.40 of 2020 filed by the applicant it was their contentions that they are the lessee of the property and the said contention was rejected by the final order in SA.40 of 2020. The measures leading to the issuance of sale notice are also narrated by the respondent in their reply statement.

¶26

The respondent had produced the loan documents, demand notice communication between the former Managing Director of the applicant with

¶27

¶28

the respondent, the documents evidencing the measures taken by the respondent, pleadings and orders in SA.40 of 2022 valuation report.

¶29

Heard the counsel for both sides and considered the contention of the applicant in the SA and the rebuttal made by the 1^st respondent in the reply statement. The documents produced by both sides were also gone into. The following issue arises for consideration in this matter: -

¶30

(i) Whether the applicant can maintain this application under section 17 as an aggrieved party?

¶31

(ii) Whether the applicant is entitled to get his possession protected, if there in possession?

¶32

Issue No. (i)

¶33

Whether the applicant can maintain this application under section 17 as an aggrieved party?

¶34

The applicant is contending that they are in possession of the property by virtue of the registered lease deed dated 5.3.1997 and subsequent lease agreement dated 10.12.2018. The applicant had produced the electricity bills which also indicate that the applicant is in possession of the scheduled property, when the measures are initiated. Section 17 of the Act enables any aggrieved person to challenge the measures initiated by the secured creditor, which also takes in any person have in any interest over the property. The applicant who claims to be in possession of the property is an aggrieved person and hence the application under section 17 is maintainable. Hence the Issue No. (i) is decided in favour of the applicant.

¶35

¶36

Issue No. (ii)

¶37

Whether the applicant is entitled to get his possession protected, if there in possession?

¶38

This issue is to be gone in to in the light of the pleadings of the applicant. It is the case of the applicant that the applicant was putting possession for 10 years from 1.2.1993. it is also to be noted that, at present the applicant is claiming tenancy in the light of lease agreement dated 10.12.2018 which itself is an unregistered lease agreement. Law in this regard is already set by the Hon’ble Apex court in “ Bajarang Shymsunder Agarwal vs. Central Bank of India and another” (2019) 9SCC 94 wherein the Hon’ble Apex Court had summarized the legal position as follows.

¶39

“24. 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.

¶40

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 S.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.

¶41

24.2 If a tenancy under law comes into existence after the creation of a mortgage, but prior to the issuance of notice under S.13(2) of the SARFAESI Act, it has to satisfy the conditions of S.65A of the T P.Act.

¶42

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. 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 S.107 of the T.P. Act”.

¶43

¶44

Hence going by the above dictum it is to be held that the applicant is having no legal right to be in possession of the scheduled property.

¶45

More over it is to be noted that the earlier SA.40 of 2020 filed by the applicant claiming tenancy had ended up in dismissal and the said order has become final. Therefore this Tribunal cannot revisit the issue again. The contention of the applicant is to be rejected on that count also.

¶46

A perusal of the memorandum of deposit of title deeds evidences that the mortgage is created over the property along with improvements, which includes the structures standing therein.

¶47

On the basis of above findings and discussions it is to be held that the applicant is not entitled for any protection, if they are in possession and accordingly this issue is decided against the applicant.

¶48

In view of the findings as entered above, this Tribunal is of the considered opinion that the applicant is not entitled for any reliefs and as such the applications SA No.23 of 2023 and SA No.106 of 2023 are liable to fail and accordingly is to be dismissed.

¶49

In the result, both SA No.23 of 2023 and SA No.106 of 2023 stands dismissed and all pending IA’s stands closed, no orders as to cost. Issue copies in accordance with Rule 16 of the Debt Recovery Tribunal (Procedure) Rules 1993.

¶50

(Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Open Court on this the 11^th day of May, 2023)

¶51

Sd/(T. RAJESH ) PRESIDING OFFICER DRT-II, CHENNAI

¶52

Ms Velvette International Pharma Products Ltd. v. LIC Housing Finance Ltd.

Case brief

What is this about?

What did the court decide?

Ms Velvette International Pharma Products Ltd. v. LIC Housing Finance Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Mr S Karthikeyan Son of Mr Srinivasan Prop of Ms Senthil Communication versus City Union Bank Limited

Bank of Baroda versus Mr. a. Jagadeesan

Indian Bank versus S. Mohan Raj

Velvette International Pharma Products Ltd. versus LIC Housing Finance Ltd.

Arulvel versus Bank of Baroda

S Sankar versus Indian Bank