Dismissed

Steel House and Ors. v. Avanse Financial Services Ltd.

DRT5 Feb 2024SA/279/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal examined whether an unregistered partnership firm could maintain an application challenging possession under the SARFAESI Act. The court dismissed the application due to lack of firm registration and failure to prove statutory tenancy rights, specifically noting the lease term exceeded the three-year limit under Section 65(A) of the Transfer of Property Act, 1982.

What did the court decide?

S.A. No. 279 of 2022 is dismissed on contest against the Respondents; pending I.A.s are disposed of.

Steel House and Ors. versus Avanse Financial Services Ltd. — Banking and Recovery | DRT (2024)

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DEBTS RECOVERY TRIBUNAL – 1, KOLKATA JEEVANSUDHA BLDG. 9^TH FLOOR, 42/C, J.L.NEHRU ROAD, KOLKATA – 700071

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BEFORE SHRI AMBUJA MOHAN DAS, PRESIDING OFFICER

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SA No. 279 of 2022

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M/s. Steel House

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A partnership firm carrying on business at ground floor and mezzanine floor, Northern side, 27, Brabourne Road, P.S. Hare Street, Kolkata- 700001

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Mr. Yogesh Sharma

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Son of Late Sagar Dutt Sharma, partner of M/s. Steel House, working for gain at ground floor and mezzanine floor, Northern side, 27, Brabourne Road, P.S. Hare Street, Kolkata- 700001

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Mr. Nikhil Sharma

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Son of Sri Yogesh Sharma, partner of M/s. Steel House working for gain at ground floor and mezzanine floor, Northern side, 27, Brabourne Road, P.S. Hare Street, Kolkata- 700001.

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………………Applicants.

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-Versus-

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Avanse Financial Services Ltd.

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Having its registered office at 001 & 002 Fulerum, A- Wing, Ground Floor, Sahar Road, Next to Hyatt Regency, Andheri (East), Mumbai- 400099 and its regional office at Saket Building, 44, Park Street, 2^nd Floor, Kolkata- 700016.

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2)The Authorised officer, Avanese Financial Services Ltd.Working for gain at Saket Building, 44, Park Street, 2^nd Floor, Kolkata- 700016.

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M/s. Manbhari Plastics Private Limited Room No. 102, 1^st Floor, Narayani Building, 27, Brabourne Road, P.S. Hare Street, Kolkata represented by its Director Sri Pawan Kumar Agarwal 3) M/s. Khatu Villa Private Limited. Having its registered office at Room No. 301, 3^rd Floor, Narayani Building, 27, Brabourne Road, P.S. Hare Street, Kolkata- 700001 represented by its director Sri Pawan Kumar Agarwal.

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………………….Respondents.

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Present:

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For Applicant : Ld. Advocate Mr. S. Mukherjee

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For Respondents no. 1 & 2 : Ld. Advocate Mr. S. Nag and Ms. A. Chaudhury For Respondent No. 3 & 4. : Ld. Advocate Mr. P. Pal

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J U D G E M E N T

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Delivered on 5^th February, 2024

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Applicant No. 1 is a partnership firm and Applicant No. 2 & 3 are the partners. The Applicants are claiming to be the tenants in respect of the property. Applicant No. 1 has filed this S. A. challenging the order of the Ld. Metropolitan Magistrate, Kolkata dated 26/07/2022 and the notice of the authorised officer of respondant F.I. for taking possession of the property. The Applicant’s claim to be the tenants in respective of the property which is on the ground floor measuring 279 Sq. ft.

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It is contended that one Sagar Dutt Sharma and Ram Niwas Gupta were doing partnership business in the name and style of “Steel House”. The said Ram Niwas Gupta left the partnership and thereafter Sri Bharat Sharma was inducted as a partner and the said partnership was reconstituted on 02.03.1973 between

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Sri Bharat Sharma and Sri Sagar Dutt Sharma. Sri Bharat Sharma resigned from the partnership on 27.02.1998. Thereafter, Applicant No. 2 along with Sagar Dutt Sharma reconstituted the partnership firm on 01.08.1998. Sagar Dutt Sharma died on 19.01.2006 and thereafter the said partnership was reconstituted on 08.02.2006 and Applicant No. 2 & 3 became partners of Applicant No. 1 partnership firm. The Applicants have annexed the copy of the deed of reconstituted partnership dated 08.02.2006 vide Annexure. A.

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One Mrinalini Properties Pvt. Ltd. and Shiv Banerjee Properties and Construction Pvt. Ltd. jointly purchased the property in question i.e. 27, Brabourne Road, Kolkata- 700 001 and commonly known as Narayani Building from Life Insurance Corporation of India by a deed of indenture dated 12.02.1973. Mrinalini Properties Pvt. Ltd. changed its name to Mrinalini Properties & Mercantile Company Pvt. Ltd by incorporation before the Registrar of Companies on 16.10.1973 and a fresh certificate of incorporation was issued by the Registrar of Companies. Mrinalini Properties & Mercantile Company Pvt. Ltd. on 01.12.1990 let out the property to Applicant No. 1 for the purpose of carrying on the business. The said company by a letter dated 01.12.1990 confirmed the tenancy of Applicant No. 1 in respect of the schedule property at a monthly rate of Rs. 414/with the maintenance charges Rs. 75/-. Applicant No. 1 accordingly paid the monthly rents to the said company time to time. The Applicants annexed the confirmation of the tenancy letter dated 01.12.1990 and the rent receipts vide Annexure ‘B’.

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The Calcutta Municipal Corporation issued the Trade License for the year 1990-91 to Applicant No. 1 partnership firm after satisfying the documents of the tenancy and rent receipts.

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Applicants annexed the Trade License issued by the Calcutta Municipal Corporation vide Annexure ‘C’.

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It is contended by the Applicant that after the sale of the said property by Deed No. 11528 of 2011 to Respondent No. 3, he became the owner of the property in question i.e Premises No. 27, Biplabi Trailokya Sarani (Formerly known as Brabourne Road), P.S. Hare Street, Kolkata- 700001. It is contended that other portion of the building was sold to Respondent No. 4. The Applicants used to pay rents to Respondent No. 3 & 4.

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The Applicants came to know that Respondent No. 1 served a notice to Respondent No. 3 by requesting to vacate the mortgaged property and the annex notice is annexed as Annexure ‘J’.

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The Applicants came to know about the order of Ld. Chief Metropolitan Magistrate (CMM) dated 26.07.2022. The Applicant also came to know that Respondent No. 3 and its associates obtained financial accommodation from NBFC on 31.07.2018 by and to the extent of Rs. 1 Crore and Rs. 50.50 lakhs respectively in respect of two loan accounts. As the Respondent No. 3 failed to pay back the loan, the accounts became NPA on 31.12.2021. Respondent No. 1 issued demand notice with outstanding dues i.e Rs. 1,71,33,863/and issued possession notice on 25.04.2022. Thereafter, Respondent No. 1 obtained order of Ld. CMM, Kolkata under Section 14(1) on 31.05.2022. Possession Notice was affixed on the part of the property on 25.04.2022. It is contended by the Applicants that the tenants were living in the building since 1998. Respondent No. 3 and 4 wanted to evict the Applicants from the premises in order to take physical possession. It is contended by the Applicant that prior to creation of security interests, the Applicants are tenants in

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respect of the said property since 1998. On the above ground the Applicants filed S. A. with a prayer to declare the order of the Ld. CMM, Kolkata illegal and bad. Further the Applicants pray for a declaration that Applicants cannot be evicted without due process of law. The Applicants also pray for compensation under Section 19 of the SARFAESI Act, 2002.

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Respondent No. 1 and 2 have filed objection to S. A application contending that the Application is not maintainable under law as well as of the facts. Their contention is that the Application is barred by limitation as the order of Ld. CMM dated 26.07.2022 and the S. A. was filed on 22/09/2022. Respondent No. 1 and 2 denied the pleadings of the Applicants that the Applicants are the tenants of Respondent No. 3 & 4. Respondent No. 3 & 4 obtained the credit facility from Respondent No. 1 and the outstanding dues is Rs. 1,71,33,863/-. As the Respondent No. 3 and 4 did not pay outstanding dues, Respondent No. 1 applied for the order of Ld. CMM, Kolkata under Section 14 of the SARFAESI Act. It is contended by Respondent No.1 that physical possession was taken on 30.01.2023 and they have annexed the taking of possession vide Exhibit ‘B’. Respondent No. 1 & 2 contend that the S. A. is not maintainable and pray for dismissal of the S. A.

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Respondent No. 1 further contended that the S. A application is filed beyond 45 days from the date of cause of action. They further contended that the possession notice was issued but the S. A. was filed beyond 45 days. Their contention is that though the Applicant’s claim to be tenant in the property from 01/12/1990, both they have not produced the tenancy agreement. The Applicants filed a letter dated 01/12/1990 issued by Mrinalini Properties & Marcantile Company Pvt. Ltd. in favor of Ram Niwas Gupta which is not in the name of the Applicants and

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the rent receipts are not in the name of Applicant No. 2 & 3. Their further contention is that Applicant 1 is a unregistered partnership firm. Applicants cannot sue in the name of the Partnership firm which is not registered. Respondent No. 4 further denied that the Calcutta Municipal Corporation had confirmed the possession in the name of the Applicants after satisfying all the rent receipts. Respondent further contended that after death of Sagar Dutt Sharma, trade license has been used which is a fraudulent act and the alleged the tenancy cannot be justified by any fraudulent act. On the above grounds, the Respondent No. 4 prayed for the dismissal of S.A.

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The Applicants filed Supplementary Affidavit containing that they were dispossessed from the premises on 31/01/2023. They have challenged the order of the Ld. CMM, Kolkata in the S.A in the Supplementary Affidavit. They submitted for restoration of the physical possession which was taken on 30/01/2023.

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The Applicants filed in Supplementary Affidavit that the property in question is used for carrying on the business in the name and style of “M/s. Steel House” and subsequently contended that by way of false representation before the Ld. CMM, Kolkata, Respondent No. 1 took physical possession of the property which is liable to be set aside and the possession of the Applicants be restored.

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Respondent No. 4 in the Supplementary Affidavit reiterated the same facts which were also pleaded by Respondent No. 1 and 2. Their contention is that the partnership firm which is not registered cannot sue against the Respondent before this Tribunal. Besides the Applicants are not able to prove the tenancy under Respondent No. 3 and 4.

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The S.A was heard on merit on 22/11/2023 and the judgment is reserved.

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Ld. Counsel for the Applicants has relied authorities on the Hon’ble Punjab and Haryana High Court in the matter of India bulls Housing Finance Ltd. Vs. the State of Haryana & Ors. and the Hon’ble Supreme Court of India in matter of Haldiram Bhujiawala and Anr. Vs. Anand Kumar, Deepak Kumar & Anr. The Hon’ble Punjab & Haryana High Court held that the District Magistrate has no jurisdiction to recall, review or modify his/her own order or the order passed by his/her predecessor. It appears from the S.A that the Applicant has not annexed the order of Ld. CMM, Kolkata dated 26/07/2022. Thereafter, the Sarfaesi Applicant in the Supplementary Affidavit dated 21/03/2023 filed order dated 10.01.2023 which is amodification of the order dated 26.07.2022. According to the decision of the Hon’ble Punjab & Haryana High Court, the Ld. CMM, Kolkata cannot modify his/ her order dated 26/07/2023 by order dated 10/01/2023.

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The Applicants claiming to be a partnership firm have filed this Application on 22/09/2022 against the Respondents. They have annexed reconstitution of the Partnership firm by ongoing partners Yogesh Sharma and Nikhil Sharma who are Applicant No. 2 & 3 respectively. This deed of reconstitution of partnership firm has not been registered before the Registrar of Partnership firms.

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Section 69, sub-clause 2 of the Indian Partnership Act, 1932

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speaks as follows:

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“No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have shown in the Registrar of Firms as partners in the firm.”

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Ld. Counsel for the Applicants at the time of hearing argued that this provision will be in respect of any dispute arising from the contract.

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The Ld. Counsel argued that Applicants are not claiming any right arising from the agreement of Partnership firm. Of course, this submission of the Ld. Counsel of the Applicants is in respect of Section 69 (1), but Section 69(2) provides that the Partnership firm cannot sue or enforce a right arising from a contract against any third party.

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In this case, the applicants claim to be tenant but the reconstitution of the partnership having not been registered, the Applicants cannot maintain any Application against the secured creditors as well as the alleged landlords as a partnership firm under Section 17 (4) (a) of the SARFAESI act.

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The Applicants claim to be a tenant in the loan agreement dated 01/12/1990, but they have not filed Rent agreement. They have filed rent receipts which are in the name of “M/s. Steel House”. None of the rent receipts are in the name of Applicant No. 2 & 3.

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Ld. Counsel of the S. A. Applicants has relied authority on the Hon’ble Supreme court in the matter Balkrishna Rama Tarle Dead Thr LRS & Anr Vs. Phoenix ARC Private Ltd. & Ors. where the Hon’ble Supreme Court held that the High Court has not committed any error in passing the judgement and order and directing the designated authority to dispose of the application under Section 14 of the SARFAESI act.

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Section 17(4A)(i) empowers this Tribunal to determine the claim of tenancy, lease hold rights and the secured assets and to decide whether the tenancy or lease:

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(a) has expired or stood determined: or,

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(b) is contrary to Section 65A of the Transfer of Property Act, 1982: or,

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(d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of Section 13 of the Act.

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Section 17(4A)(ii) further empowers this Tribunal after satisfying the tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.

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In this case, the Applicants have not proved the lease agreement. They have filed copies of rent receipts which are not in the name of the Applicants. The rent receipts issued in the name of partners who have already left the partnership firm. None of rent receipts are in the name of Applicant No. 2 or 3.

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Section 65(A) of the Transfer of Property Act, 1882 speaks as follows: “Subject to the provisions of the subjection, a mortgagor, while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee.

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Section 65(A)(2)(e) provides that in the case of a lease of buildings, whether leased with or without the land on which they stand, the duration of the lease shall in no case exceed three years, and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid within a time therein specified. In this case the Applicants have failed to prove the loan agreement. The claim of tenancy is continued from

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01/12/1990 which contravenes the provision of Section 65(A)(2)(e) of the Transfer of Property Act, 1882 as the lease exceeds more than 3 years. In this case, the Applicants have failed to prove valid tenancy. Therefore the Applicants cannot claim any right under Section 17 4(A) of the SARFAESI act. Hence the S. A is liable to be dismissed against the Respondents. It is ordered:

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O R D E R

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SA/279/2022 is dismissed on contest against the Respondents. Consequently pending I. A.s are also disposed of.

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Copy of the Judgement/ Final order be uploaded in the Tribunal’s website.

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File is consigned to the Record Room.

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(Dictated to Stenographer, transcribed by him, corrected, signed and pronounced by me in the open court on this day 5^th February, 2024.)

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(Ambuja Mohan Das)

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Presiding Officer

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	Order Sheet (continuation)
Case No. SA-279-2022	Steel House & Ors. –vs- Avanse Financial Services Ltd.
Date of the Order	Order with Signature Office action with date and dated Signature of Parties when necessary

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05/02/2024	Present:
	For Applicant : Ld. Advocate Mr. S. Mukherjee For Respondents no. 1 & 2: Ld. Advocate Mr. S. Nag and Ms. A. Chaudhury For Respondents no. 3 &4: Ld. Advocate Mr. P. Pal Matter was heard in open Court on this the day of 22/11/2023.
	The detailed order in 10 pages annexed separately. The gist of the order is as follows: O R D E R SA/279/2022 is dismissed on contest against the Respondents. Consequently pending I. A.s are also disposed of. Copy of the Judgement/ Final order be uploaded in the Tribunal’s website. File is consigned to the Record Room. (Dictated to Stenographer transcribed by him, corrected, signed and pronounced by me in the open court on this day 5^th February, 2024.)
	(Ambuja Mohan Das) Presiding Officer

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Steel House and Ors. v. Avanse Financial Services Ltd.

Case brief

What is this about?

What did the court decide?

Steel House and Ors. v. Avanse Financial Services Ltd.

Case brief

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