Dismissed

M S P v. Amarnadha Prasad and Co. v State Bank of India

DRT22 Aug 2025SA/26/2023

Case brief

AI extract

What is this about?

In a Section 14 SARFAESI application, the Debts Recovery Tribunal dismissed the tenant's plea challenging physical possession by a mortgagee bank. The court held the post-mortgage lease was invalid as it exceeded the three-year limit and contained a renewal clause under Section 65-A of the Transfer of Property Act.

What did the court decide?

Student application under Section 14 of the SARFAESI Act was dismissed; bank's proceedings for physical possession were upheld.

M S P v Amarnadha Prasad and Co. versus State Bank of India — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL - I AT HYDERABAD DATED THIS THE 22ND DAY OF AUGUST , 2C.25

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PRESENT: GUMMADI GoPICHAND, PRESIDING OFFICER

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SA.No.26/ZOZ1

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M/s P.V.Amarnadha prasad & Co, Rep. by its^proprietor Dr.P.V. Amarnadha prasad S/o P.Satyanarayana, aged 64 years, #501 & 502, Aditya Court, 8-2-334, Road No.3, Banjara l{ills, Hyderabad-SO0 0{14.

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... Applicant

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And.

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i. The Authorized officer State Bank of India, Stressed Assets Recovery branch, 2.d floor, TSRTC Commuter Amenity Centre, Bus Terminal Complex, Koti, Hyderabad-sOo 09S.

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Smt.P.indira, W lo P.Surya Buchi Reddy, Aged 58 years, plot No.25, Indu Residency, Kondapur, Near Chirec public School, Hyderabad.

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M/s. Aditya Hotels and Resorts S/o Sekar Reddy, e S1,.No.5/6 to Slt2, I{ytex Campus, Kondapur, I{ydera Also at: Sy.No.237, llesicie Vattinagulappaly Rajendra nagar Respondents 9:i:::' : . 1y:!,::;1''-1;S;"xr';n svs choud ary Counsel for the J'r Respo ndent : Sri C.Prabharkar Respondents No.2 to 3 : Exparte

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-:ORDER:-

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This application is filed by the Applicant u/s.LT of the SARFAESI Act, 2OO2, challenging the proceedings initiated by the 1st Respondent Bank for taking physical possession of the schedule property pursuant to the orders of Ld.III Addl.CMM, Hyderabad and to declare the same as illegal and void.

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The averments made in the application, in brief, are that:

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1'he Applicant entered into a l.ease Agreement dt.27.o2.2ol3 with Rcspondent No.2 ancl later, the said lease was renewed upto 14.o3.2028 by way of Regd. Document No.2o02 12022. on 13.0 1.2023, vacation Notice was affixed on the schedule premises. Later, the Applicant came to know that the schedule property was mortgaged in favour of the 1"t Respondent bank by the Respondent No.2 and 1"t Respondent bank approached Ld.lII ACMM, Hyderabad for vacating the schedule premises whereas the Ld.III ACMM, Hyderabad was pleased to appoint advocate commissioner for taking physical possession of the schedule property. As per the lease agreement obtained by the Applicant, the Applicant cntitled to occupy the schedule premises up to March, 2028 and so, the Applicant cannot be dis-possessed from the schedule property. Hence the SA.

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.).a

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The l^st Respondent Bank filed their Reply denying all the adverse allegations made in the sA and contended that Applicant being 3ra party, has no right to question the procedure adopted by the l"t Respondent Bank for taking physical possession of the schedule property. Respondents No.2&3 availed various credit facilities from the 1st Respondent bank and created mortgage in respect of the schedule property. The tenalgy or the Applicarrt is contrary to Section 65A of ,l.ransferor-,p;6.frffir.rsglandzrlqn^nnfranrfn+l^^+^.^^f 2 and also contrary to the terms of :H:r#ffi,ffi of Section 65-.4 of Transfer of property rt Ac t, t hft'{tbl:talln{ftr'ralt b ec S&c adcovenrii$}ftr ,"n"al in the lease deed. In case of Iease fiUratio^{ibf tne lease shall in no case exceed} three t No.2i' ted lease deed dt.19.03.2022

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without prior consent of the 1st Respondent Bank. The duration of the lease as per the lease deed is six years which is contrary to the provisions of Section 65-A of Transfer of Property Act. Basing on the invalid lease deed, the Applicant cannot seek any relief as there is no privity of contract between the 1st Respondent Bank and the Applicant and hence the SA is liable to be dismissed.

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Heard Ld. Counsel for the Applicant and Ld. Counsel for the lst Respondent whereas Respondents No.2 & 3 are exparte. Perused the material brought on record.

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Now the points that arise for consideration are

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i. utlrcther the Applicant has established anA ualid^grounds for challenging the proceedings initiated by the 7't Respondent for taking phgsical possession of the schedule property u/ s 14 of the SARFAES/ Act, 2002 ?

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ii. To what relief?

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Point JVo.(i):-

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During the course of arguments, Ld. Counsel for the Applicant^{and Ld.} Counsel for the lst Respondent reiterated their respective^versionsas stated supra.

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7_ The specific contention of the Applicant is that the^{Applicantenteredinto} lease agreement with Respondent No.2 initially for a^period of^{nine years} under Lease Deed dt.27.O2.2O13 and there is a clause^{in the said lease} agreement for renewal of the lease for a^period of^{six years and} subsequently, the lease was extended for a further^{period of six years and} so, the Applicant cannot be evicted from the schedule^premises.

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Per contra, 1st Respondent Bank contended that the^leasedeed dt.27.O2.2O13 which was executed by the^{Respondent No.2 is againstthe} provisions of Section 65-A of Transfer of Property Act and so, it^{is not} binding on the. ank and so, the lst Respondent Bank^has got every r gs under Section 74 of the SARFAESI Act,2OO2,, ion of the schedule property.

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In support of his contentions, .Ld. counsel for the Appllcant relied upon the judgement of Hon'ble Supreme Cour-t, reported in (2O14) G SCC betuteen Ho;rsho,d Gouardhan Sond,agar Vs. InternqtlonalAssets Reconstntctlon Compang Ltd. & others.

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As per the contentions of the Applicant, it is clear that initially, the Applicant took the schedule property from the Respondent No.2 under Regd. I.ese Deed dL.27.O2.'2O1ll. As pcr thc terms of the lease deed, lease is for a period of nine years. But however, the lease can be renewed for another six years with mutuai consent of both the parties. So as per the said lease deed, the lease was extended in March, 2022. There is no dispute regarding the fact that subsequent to the execution of lease deed by the Respondent No.2 who is owner of the schedule property, created mortgage in respect of the schedule property towards security for the loan availed by the Respondents No.2 and 3 from the lst Respondent bank. But subsequent to the creation of morl.gage with the 1"t Respondent bank, Respondent No.2 executed anothcr Lease Agreeement dt. L9.o3.2022 in favour of the Applicant. In thc said leasc deed, it is mentioned that lease is for a period of six years commencing from rs.o3.2o22 and after completion of six years, lease can be renewed for a period of six years with mutual consent of both the parties. As per the provisions of Section 65A of Transfer of Property Act, 1gg2, Respondent No.2 being the owner of the schedule property, even after creation of mortgage in favour of the 1"t Respondent Bank, can enter into lease agreement. But the lease should not exceed a period of three years. tlut in the instant case, after creation of mortgage by the Respondcnt No.2 in lavour of the 1st Respondent Bank, she executed lease for a period of six years. Moreover, there is a clause for renewal of lease in the said lease deed. so, .he said lease deed is against the principles of Section 65-4 Transfer of property Act.

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F-or better
ction 65-4. of Transfer of property Act is
reproduc
65-A
2 2 /|Ul 1trfr

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(1) Subject to lhe prouisions of sub-section (2), a mortgagor, uhile lawfully, in possession of the mortgaged propertg, shall haue pou)er to make leases thereof which shall be binding on the mortgagee.

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2(a) Euery such lease shatl be sach as would be made in the ordinary course of management of the propertg concerned and in accordance u.tith ang local lanu, custom or usage,

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(b)Euery such lease shall reserue the best rent that can reasonablg be obtained, and no premium shall be paid. or promises and no rent shalr be payable in aduance,

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(d) Euery such lease shall take effect from a d.ate not later than six months from the date on uhich it is mad.e,

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(e) In the case of a lease of buildings, uhether reased tuith or u.rittrcut the land on uhich theg stand, the duration of the lease shall in no case exceed three gears, and the lease shall contain a couenant for paAment of the rent and a condition of re-entry on the rent not being paid uithin a time therein specified.

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So, the said lease deed cxecutcd by the Respondent No.2 in favour ofthe Applicant on 27 .o2.2or3 is not binding on thc l sr Respondent. Moreover, by 18'03'2025, three years period as contemplated u/s 65-4 of Transfer of Propert5z Act was also completed from the date of execution of the said lease deed dt. I9.O3.2o22. In view ol the same, the Applicant cannot continue as a tenant of the schedule propert5r

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So, considering ali the circumstances, I am of the opinion that Respondent No.2 created valid mortgage in respect of the schedule property in favour of the l"t Respondent Bank, and the lsr Respondent Bank as secured crcditor, invokc the provisions of SARF.AESI Act.2002 for propcrtv. ."arte

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,.s, f ffl\tne opinion rhat the Applicant is not entitled iqg{linitiated by ths 1"t Respondent Bank before d u/s 14 of the SARFAESI Act, 2OO2 for

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taking physical possession of the schedule property. so, I see no ground warranting the interference of this Tribunal with the steps initiated by the lst Respondent for taking physical possession of the schedule property u/s l4 of the SARFAESI Act,2O02. Accordingly, this point is answered in favour of the 1.t Respondent and against the Applicant.

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Polnt No.(ii):-

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