Allowed

M S Sai Ram Krishna Motorbikes Private Limited v. State Bank of India

DRT22 Aug 2023SA/40/2023

Case brief

AI extract

What is this about?

In an application under S. 17 of the SARFAESI Act, the Applicant challenged the Bank's order for possession, claiming superior leasehold rights. The Tribunal held that unregistered leases are not valid against a secured creditor's right to possession under S. 13/14 of the SARFAESI Act. However, recognizing the Applicant's business operations, it granted a two-month period to vacate.

What did the court decide?

Granted two months time to the Applicant to vacate the application schedule properties.

M S Sai Ram Krishna Motorbikes Private Limited versus State… — Banking and Recovery | DRT (2023)

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IN THE DEBTS RECOVERY TRIBUNAL - I AT HYDERABAD

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DATED THIS THE 22ND DAY OF AUGUST.2023

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PRESENT: GUMMADI GOPICHAND, PRESIDING oFFICER

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sA.No.40./2c23

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M/s. Sai Ram Krishna Motorbikes Pvt. Ltd., Having its Regd. Office: H.No.26-6-43ll, Sy.No. 165, Mallapur Village, Near LIC Office, Srinagar Colony, Godavarikhani - 505209. Rep. by its Director, Sri Manchikatla Dayakar, S/o. late Kistaiah, aged 48years, Male, Occ : Business, R/ o. H. No. 1 9 -8-29 l, Laxminagar, Godavarikhani, Peddapalli District, Telangana.

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Applicant.

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Tersus

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M/ s. State Bank of India, Stressed Asset Recovery Branch, Sripuram, Baiajinagar, Vishakapatnam. Rep. by its Chief Manager-cumAuthorized Officer.

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) Sai Ram Krishna Cars Pvt. Ltd., Having its Regd. Office: Ground Floor, 101, 102, Balaji Metro Commercial, Narona Road, Dondaparthy, Visakhapatnam- 16. Rep. by its Director, Sri M. Manoj Krishna, S/o. Venkata Swamy, aged 35 years, Male, Occ: Business, R/o. Ptot No.85, Road No.72, Prashashan Nagar, Jubilee Hills, Hyderabad-33.

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.). Sri M. Manoj Krishna, S/o. Venkata Swamy, aged 35 years, Male, Occ: Business, R/o. Plot No.85, Road No.72, Prashashan Nagar, Jubilee Hills, Hyderabad-33.

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Sri M. Pramod Krishna, S/o. Venkata Swamy,
aged 35 years, Male, Occ: Business, -i_: . "- r -:>-
R/o. Plot No.85, Road No.72, Prashashan Nagar, ,..it.. , ',t - ,"1..
Jubilee Hilts, Hyderabad-33.
,il** -
; _ =s,ib\ t^r t1',
5. Sri Biyyar Harsha Shetty, S/o. Biyyar O,.,"116 ;'/.P i 'i
Shetty, aged about 52 years, Male,
i. ,
2 ? IllE 20n - l,;
Occ: Business, R/o. H.No.2-2-23-221C, i -,
Maruthi Nivas, Durgabai Deshmukh Colony, ..i fii
Baghamberper, Hyderabad - s3o or3. tl(bSr_,,,^_.,tn{rr#'i,i .-i-i,i
I'{gx#z

SA.No.40/2023

M/s. MRK Industries,

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Rep. by its Managing partner, Sri M. Venkata Swamy, S/o. late M. Kistaiah, Male, 63 years, Occ: Business, R/o. H.No.21_4_g3/ 1, Plot No. 16/4, IDA, Gouthami Nagar, Ramagundam, Peddapalli District, Telangana. Respondents.

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(No relief is praged against Respond.ents 2 to 6 As theg are onlg proforma Respond.ents)

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Counsel for the Applicant l Sri G. Y. Kishnam Raju. Counsel for Respondent No.1 : Si C. Prabhakar.

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-:ORDERi

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This application is filed by the Appricant u/s.r7 of the SARFAESI Act, 2002, challenging the action of the 1st Respondent Bank in obtaining orders u/s.14 of the SARFAESI Act, from the District Collector, Peddapalli, for taking physical possession of the application schedule properties.

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The averments made in the application, in brief, are that, the Applicant is neither a borrower nor a guarantor to the roan transaction with the 1st Respondent Bank. The Applicant is running a motorbike showroom in the premises of Item No.1 of the schedule property by obtaining lease of the said property from Respondent No.4 vide Lease Agreement dt.22.O7.2O15. For expansion of its business and for keeping its inventory of two wheelers and spares, the Applicant also obtained lease of the Item No.2 of the schedule property from Respondent No.6 vide Lease Agreement dt. 10.03.201g. The Applicant has also invested substantial amount in the schedule property for carrying out its business operations. While so, the 1it Respondent Bank by suppressing the fact of existence of running twp wheel#, sl and go-down in the schedule properties, ottained orders J District Collector, Peddapalli, for taking physicat posseSiion of properties. On enquiry, the Applicant camq to il"2,*i,ifr#Z&re +ecreated favour of the lst subsequent to the

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SA.No.40/2023

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lease of the Applicant in respect of the said properties. So, the lease in favour of the Applicant prevails over the mortgage in favour of the 1"t Respondent Bank and so the said mortgage is subject to the leasehord rights of the Applicant. Hence, the SA.

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This application is resisted by the 1st Respondent Bank by filing its Reply statement' The contentions of the lst Respondent Bank, in brief, are that, the Applicant is unregistered Lease Horder and the alreged Lease Agreement dt'22.or .2ors is against the provisions of the Transfer of Property Act and so the said Lease Agreement is not sustainable under law' The alleged Lease Agreement is executed in coilusion between the lessor and lessee without obtaining any consent or permission from the Bank and the borrower and mortgagor while availing the loan facility has not brought to the notice of the Bank about the alleged un-registered Lease Agreement. The Applicant being a third_party isnot entitled to challenge the SARFAESI proceedings initiated by the Bank as the owner of the property himserf is not aggrieved and not challenged the proceedings initiated by the Bank. The 6e Respondent being borrower availed various loan facilities rrom the l"t Respondent Bank and the other Respondents being guarantors/ mortgagors executed various loan documents and created mortgage over the properties in favour of the Bank. As the borrower/ guarantors failed to repay the loan amount, the lst Respondent Bank issued Demand Notice u/s. i3(2), followed by Possession Notice u/s. 13(4) and thereafter proceeded u/s. 14 of the SARFAESI Act, for taking physical possession of the secured assets. so, the Respondent Bank prayed for the dismissal of the SA.

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The Applicant liled Rejoinder denying all the contentions raised by the 1"t Respondent Bank in its Reply Statement.

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Heard arguments. Ld. L(,unset tor lhe Applicant filed his wrirten submissions.

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Now, the points that arise Ior conslderafion a , re,_ I^{r,rljlrl *,} .: : -'.-'_ . --.-..'

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SA.No.40/2023

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i) Whether the Applicant has established valid tenancy in the application schedule properties and if so, whether the Applicant is entitled to possession of the said properties by virtue of the lrase Agreements?

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ii) To what relieP

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Polnt No.li):-

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There is no dispute regarding the fact that the application schedure properties are mortgaged in favour of the lst Respondent Bank towards security for the loan facilities availed by the 6th Respondent. It is the contention of the Applicant that it has obtained the Items No.l & 2 of the schedule properties on rease vide Lease Agreements di22.or.2ors and 10.03.2018, executed by Respondents No.4 & 6 respectively, which are prior to the mortgage of the said properties and so the lst Respondent Bank cannot proceed under the SARFAESI Act, for evicting the Applicant from the schedule premises without following due process of law. I have perused the said Lease Agreements dt.22.or.201s and 10.03.201g, fired by the Applicant along with the SA. The Lease Agreem ent d,t.22.O7.2OlS in respect of Item No.1 of the schedure property, executed by Respondent No.4 is favour of the Appricant is for a period of 15 years from 0r.04.2015 till 31.03.2030 for a monthly rent of Rs.30,o00/-. similarly, the Lease Agreement dt. 10.03.2018, in respect of Item No.2 of the schedule property, executed by Respondent No.6 in favour of the Applicant is for a period of 10 years from 10.03.201g ti11 09.03.202g, for a monthly rent of Rs.10,000/-. Both the said Lease Agreements were executed on Rs. 100/stamp paper and both are unregistered. 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. In the absence of a registered instrume4t, if the tenant relies on an unregistered instrument or an oral agreement u""ornp4f,i"d. by delivery of possession, the tenant is not entitled to possession of th6 s&ured asset for more than which the period prescribed under is relying on^{iui]fregistered} fectffi Hn.f - tf,€"F Act. So, the Applicant, Lea"e agosfierts, is not entitred to .:;-.i.i_,i

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t... o.; ," ' '. i..'.t" "-'^,i

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SA.No.40/2023

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claim possession of the secured assets, against which the 1st Respondent Bank is proceeding under the SARFAESI Act, to recover its legitimate dues from its borrower/guarantors/mortgagors. Admittedly, the borrower/mortgagors did not choose to challenge the proceedings initiated by the l"t Respondent Bank under the SARFAESI Act, against the application schedule properties. So, the Applicant being a third-party, is not entitled to charlenge the SARFAESI proceedings initiated by the lst Respondent Bank against the application schedule properties. Accordingly, this point is answered against the Applicant.

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However, during the course of arguments, Ld. Counsel for the Applicant submitted that, the Applicant is running a motorbikes showroom and also keeping inventory of two-wheelers and spare parts in the schedule properties and it wouid be very difficult for the Applicant to vacate the premises all of a sudden and so, he requested 2 months time for vacating the premises. considering the submissions of the Ld. counser for the Applicant, I find it just and proper to grant two months time to the Applicant to vacate the application schedule properties. So, the 1"r Respondent Bank may grant two months time to the Applicant for vacating the application schedule properties.

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Polnt No.llllt

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the Securitization Bank any,

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of this order to the parties concerned.

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coftected, sigfted oad pronounced by me in the open coutt on this

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sd/T"{,UE^CGPY (c. coPrcHANDl PRESIDING OFFICER .",,.MNr,y !t-'.. | . !.lYDEfrABAO'

M S Sai Ram Krishna Motorbikes Private Limited v. State Bank of India

Case brief

What is this about?

What did the court decide?

M S Sai Ram Krishna Motorbikes Private Limited v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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Case details

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