Dismissed

Ms Amrit Enterprises v. Kotak Mahindra Bank Limited

DRT9 Sept 2024SA/92/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed a security application filed by a tenant challenging eviction proceedings initiated by a secured creditor under Section 14 of the SARFAESI Act, 2002. The Tribunal held that the tenant lease, created after the mortgage, did not satisfy conditions of Section 65A of the Transfer of Property Act, 1882, and thus was not binding on the bank.

What did the court decide?

The present Securitization Application is dismissed. Interlocutory Applications stand disposed of.

Ms Amrit Enterprises versus Kotak Mahindra Bank Limited — Service and Employment | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL - I AT HYDERABAD DATED THIS THE gTH DAY OF SEPTEMB ER,2c/24

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PRESENT: SRI GUMMADI GoPICHAND, PRESIDING oFFICER

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sA.No.92,/2c22

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M/s Amrit Enterprises Rep. by Managing partner Abhishek Biyani S/o BhagwandasBiyani Aged 37, Occ:business, R/o D.No. ls-2-330, 334,335, 336&337 Situated at Mukhtiyaargunj, Hyderabad.

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... Applicant

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Versus

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.7..The Authorized officer Kotak Mahindra Bank Ltd., Jewel pavani Towers. Raj Bhavan Road, Somajiguda, Hyderabad.

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2.Mr. RajaramMalpani, S/o Iaxmi Narayana Malpani, - -^{lg.d major, 15_2_336&347,} Mukiyargunj, Hyderabad_S00o I 2

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Mr. Ashish Malpani, .Sf^{o^$ilamtvlalpani, agedmajor,} 15-2-336&337, Mukiyargunj, Hyderabad_5000 1 2

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... Respondents

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Counsel for the Applicant Counsel for lst Respond.ent Bank Counsel for Respondent No.2&3

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: M/s R.R. Associales : SmL P.S.Sujatha : Sri J, Jeeuan

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rm 1. This Applicatio., ie'ffi o, ,n$orr,,"lr? /s.17 of the Securitization and Reconstructiqfvof F&-,9"$ff ;p;.," Enforcement of Security rlcr,Esr Act, 2 OO2l00?J cfr* Interest Act,2OO2 ffip6nSr ing the action taken by dp,"ne$,if? .tetiiltg

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sA92/22

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the lstRespondent Bank for taking physical possession of the schedule property pursuant to the orders of Hon'ble CMM, Hyderabad in Cr1.M.P.No.33 122 and to declare the same as illegal and arbitrary.

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The averments made by the Applicant in brief are as follows:

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The Applicant is a tenant of the application schedule property by virtue of Registered Lease Deed dt.03.10.2020 executed by Respondents No.2&3. The lease is for a period of five years and the rent payable is Rs.4 I ,O00/ - with enhancement of rent every year by Syo and the Applicant has paid an advance amount of Rs. 1,1O,OOO/_ to the Respondents No.2&3. On 11.04.2022, the petitioner received a notice from P.VenkataRamulu, Advocate commissioner asking him to handover the possession of the schedule property within 15 days. On enquiry, the Applicant came to know that Respondents No.2&3 have availed loan from the 1st Respondent Bank by mortgaging the schedule property. At the time of execution of lease deed, the Respondents No.2&3 did not inform the Applicant about the mortgage created by them in favour of the lst Respondent Bank. The lst Respondent Bank has no right to evict the Petitioner/Applicant from the schedule property. The Applicant is not a party to the proceedings before the Ld. CMM, Hyderabad. Hence the SA.

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The 1st Respondent Bank filed their reply contending that Respondents NO.2&3 created mortgage in respect of the schedule property by deposit of title deeds on 22.09.2017 in favour of the l"t Respondent Bank as a security to the loan facilities availed by them and confirmed the said mortgage by executing Memorandum of Entry of Deposit of ritle Deeds (MODT). The schedule property was leaded out to the Applicant by the Respondents No.2&3 on M.tSia12ci.::;i.e I2Q?p;:rle .^{after creationof mortgage,} '"16&' which is nor valid ffidSlqS noitpffie under Section 65(.4) of rransfer of^{property,f"6.$i} . 1r s 8&:s[]rl," ents No.2&3 have not i! r^^^^ -r^^l:oT".,t.'f,0. :nh'ff^{fffo2p1'"t.Eft' u"to'. executingthe} obtained consenr r#U.,hit,i, SpT lease deed. So, thei'sgid le"as! deed is go.Si,l, legdt and valid, so the , i-' ^$^s:11 ' r.".:..ti'rr.- . -*F".8/$ai,?li,9

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Applicant has no right to challenge the action initiated by the ls Respondent Bank under the provisions of SARFAESI Act, 2002 against the schedule property. The schedule property consists of a building with Ground floor, four more upper floors and a pent house (G+4 Floors+pent house) above said floor, whereas the lease deed relied upon by the Applicant dt.03. LO.2O2O bearing document No.22O8l2O2O was entered into in relation to shops in ground floor and godown in first floor only. So the Applicant claiming right over the entire building by virtue of the alleged Lease Deed is void. The Applicant is not entitled to claim any right over the schedule property and hence the SA is 1iable to be dismissed as there are no merits.

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Respondents No.2&3 though represented by their counsel, not filed Reply in spite of availing sufficient time and hence their right of filing reply was forfeited.

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Heard arguments. The point for consideration is

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whether the Applicant is entitled to challenge the proceedings initiated bg tLe 1"t Respondent Bank u/s 14 of the SARFAES/ Act, 2002 pursuant to the orders of CMM, Hgderabad for taking phgsical possession of ttrc schedule propertg?

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ii) To uhat relieJ?

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Po{zt JVo.(if :

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The undisputed facts of the case are that Respondeqts No.2&3 are owners of the schedule propert5z who created mortgage in respect of the same in securit5r to the loan by them from the l^st

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Respondent Bank whereas te company which

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obtained the schedule p dt.03.10.2020 for a period of five mmitted by the

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l"^{'sru $rF} tnff'"8

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sA92l22

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Respondents No.2&3, thelst Respondent Bank initiated proceedings under the SARFAESI Act, 2OO2 for taking physical possession of the schedule property.

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Ld. Counsel for the Applicant argued that the Applicant is the lessee of the schedule property under the Regd. Lease Deed dt.o3. ro.2o2o and the lease is for a period of 5 years and during the subsistence of the lease period, the lst Respondent Bank is trying to evict the Applicant from the schedule property by obtaining orders from the CMM, Hyderabad without making the Applicant as a party to the proceedings before the CMM, Hyderabad. The Applicant further argued that the Advocate commissioner appointed by CMM, Hyderabad issued notice dt.11.O4.2O22 to the Applicant to evict it from the property within fifteen days but the Applicant cannot be evicted during the subsistence of the lease period.

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In support of his contentions, Ld. Counsel for the Applicant relied on the judgement of Hon,ble Apex Court reported in Supreme Court Cases (2014) 6 SCC betuteen H ar s had.Goaar dhanS o ndag ar Vs. Internqtlonal Assets Reconstructlon Compang Ltd.. & others.

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Ld. counsel also reried on another judgement of Hon'bre Apex court

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between vtshal N. Karsarra vs. Bank o! India & others rn ctvit Appeal No.422 /2O16 dt.2O.Ot.2O16

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Per contra, Ld. counsel for the rst Respondent Bank argued that the impugned Lease Deed was executed by the Respondents NO.2&3 on 03.10.2020 whereas the creation of mortgage in favour of the l"tRespondent Bank in respect of fi5:dgle . . ::t-_\ property was in the year 2077 and the lease period lease deed is fie years which is against the provi sfer of Property Act and so, the said I and. alid, and it is not binding on the l^stRespond afgued that the

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proceedings of CMM/DM, under Section 14 of the SARFAESI Act, 2OO2 are ministerial step and Section 14 does not involve any adjudicatory process, so notice by DM/CMM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and thus the proceedings initiated before the Ld.CMM, Hyderabad for taking physical possession of the schedule property are quite legal, valid and binding on the Applicant. It is further argued that the Advocate commissioner issued notice to the Applicant herein by giving reasonable time for evicting it from the schedule premises, But the Petitioner filed the present SA.

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Ld. counsel for the 1st Respondent Bank in support of his contentions, relied upon the judgment of Hon'ble Apex court betueen Balkrlshna Rama Tarle Dead. vs. Phoenk ARc p.Ltd. rn specral l*aae petition No.16O13/2O22 whereln tt is held ln para 9 uhlch is asylollous:

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"Thus, in uieut of the scheme of the SARFAESI Act, more particularlg, Section 14 of the SARFAESIAct and- tlw nature of the pouers tobe exercised bg Ld. Chief Metropolitan Magistrate/ ld.District Magistrate, the High Court in tLLe impugnedjudgment and order has ightg obserued and. held. that the power uested in the learned Chtq Metropolitan Magistrate/ learned Distict Magistrate is not bytaay of "persona di"signata". Thus, the pouers exercisable by CMM/DM under Section 14 of the SARFAES/ Act are ministeial step and Section 14 does not inuolue any adjudicatory process qua points raised. bg the borrou-ters against the secured creditor taking possession of the secared assels. In that uiew of the matter once all the requirements under he SARFAESI Act are complied ulith/ satisfted bg is the duty cast upon tte in obtaining the to the secured assets euen the b& CtP"t0l subordinate to him

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and/ or with the help of an aduocate appointed as Aduocate Commissioner. At that stage, the CMM/ DM is not required. to adjudicate the dispute between tLrc borower and the secured. creditor and/ or betuteen ang other third partg and the secured creditor with respect to the secured assels and the aggrieued. partg to be relegated to raise objections in the proceed.ings und.er Section 17 of the SARFAESI Act, before Debts Recouery Tibunal. Under the circumstances, the present case no error has been committed bg the High Court in setting asid.e the order dt.27.08.2021 passed bg the d.esignated. authoity keeping the application pending ti the secured cred.itor initiates the regar proceedings for euiction of the tenant cannot get the possession in an application under Section i4 of the SARFAESIAcI. The High court has ightrg directed the designated authority to proceed. further^{tuith the} apprication under section 14 of the SARFAESI Act, and to dispose of the same in accord.ance uith the prouisions of Section 14 of the SARFAESI Act,'.

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1 1 ' Admittedly, the mortgage in respect of the schedure property was created by the Respondents No.2&3 in favour of the l stRespondent Bank in the year 2077 by deposit of title deeds. The impugned lease deed executed by Respondents No.2&3 in favour of the Applicant is on 03.10.2020 i.e. subsequent to the mortgage created by the Respondents No.2&3, even though, it is a registered lease deed. A perusal of the Lease Deed indicates that the lease period is for a period of live years commencing from 01.09.2020.

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The Hon'ble Apex Court in BaJrangshgamsund.ar Agarual Vs.Central bank oJ India& Another reported. tn (2019) 9 SCC 94,alter considering vario the Hon'ble Apex Court in relation to right of a asset, held that: 0 I nitP :p.tr

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"If a tenancg under law comes into existence after the creation of a mortgage but pior to issuance of a notice under Section 13(2) of the SARFAESI Ac| it has to satisfg the conditions of Section 65_A of the Transfer of^propertg Act, 1 882".

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In Para No.24 of the said judgement it is held as follows:

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24.1: If a ualid tenancg under law is in existence euen prior to the creation of the mortgage, the tenant,s possession cannot be di.sturbed bg the secured creditor bg taking possession of the propertA. The lease has to be determined in accord.ance uith Section 111 of the TP Act for determination of leases. As the eistence ofa pior existing leaseineuitablg affects the risk undertaken by the bank uhile prouiding the loan, it is expected. of banks/ creditors to haue conducted. a stand.ard due diligence inthis regard. Where the bank has proceed.ed to accept such a propertg as moltgoge, it taill be presumed that it has consented. to tLrc nsk that comes as a consequence of the existing tenancg. In such a sifitation, the rights of a rightful tenant cannot be compromised under the SARFAESI Act proceedings.

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24.2: If a tenancy under laut comes into existence after the creation of a mortgage, but pior to tLrc issuance of notice und.er Section 13(2) of the SARMESIAcI, it has to satisfy the conditions of Section 64-A of the Tp Act.

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24.3: In ang case, if ang of the tenants claim that he is entitled to possession of a seanred asset for a term of more than a gear, it has to be supported of a registered instntment. In the absence of if the tenant relies on an unregistered accompanied bg deliuer of ii"r,or, K..,.*r.ie^{{r or eltltJed} fo possession orf ' r. -- "1 '-.---- ) ;.-. --*;.-:--

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tle secured asset for more than tlw peiod prescibed und.er Section 1O7 of the TP Act."

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Thus, in view of the ratio laid down by the Hon,ble Apex Court in BaJrangShgamSund.ar Agarual Vs.Central bank of Indta & Anotherus referred supra, the impugned Lease Deed dt.O3.1O.2O2O executed by the Respondents No.2&3 in favour of the Applicant in respect of the schedule property is not legal and valid and does not binding on the lst Respondent Bank as it is executed by violating the conditions mentioned under Section 65(A) of rransfer of propertlr Act, 1882' so, considering all the circumstances, I hord that the Applicant is not entitled to seek any relief against the lst Respondent Bank as the Bank has rightly initiated steps by following the the prescribed provisions of the SARFAESI Act, 2002 and the tenancy created by the Respondents No.2&3 in favour of the Applicant is not legal and valid.

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14' so, the Applicant has failed to establish any ground for chalrenging the Notice issued by the Advocate commissioner u/s 14 of the Act pursuant to the orders of CMM, Hyderabad u/s 14 of the SARFAESI Act, 2002 against the schedule property and so, the present SA filed by the Applicant is liable to be dismissed. Accordingly, this point is answered against the Applicant and in favour of the Respondent Bank.

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Polnt No.ltl)t

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In the result, the present Securitization Application is dismissed. Consequently, the Interlocutory Applications, pending if any, shall stand disposed of. No order as to

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Communicate a copy of this order to the parties concerned.

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(Dictated to the P.A, transcribed bg her, corrected, signed and pronounced bg me in the open court on this ttre 9thdag of September, 2024).

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sd/(G. GOPr CHANDI PRESIDING OFFICER

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,{t:ii'r;:;^,

Ms Amrit Enterprises v. Kotak Mahindra Bank Limited

Case brief

What is this about?

What did the court decide?

Ms Amrit Enterprises v. Kotak Mahindra Bank Limited

Case brief

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