Securitization Application dismissed. Applicant claiming tenancy rights via a 5-year registered lease executed after mortgage creation. Tribunal held lease violated Section 65A Transfer of Property Act and mortgage terms. Applicant ordered to surrender possession.
Application dismissed; applicant ordered to surrender possession to secured creditor within one month.
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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM
PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER
Dated this the 17th day of July, 2025
SECURITISATION APPLICATION No.458/2024
Between
Navasudeen S., Aged 40 years, S/o. Shihabudeen, Proprietor, M.R. Fabrics, Residing at Dharul House, S.V. Nagar, Ayathil P.O., Pattathanam, Kollam – 691 021. …Applicant
And
This Securitization Application having been heard on 23.06.2025 in the presence of Advocate Shri. Jojo George for the
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applicant and Advocate M/s. Deepak Joy K. & Sandhya Raman for the 1st defendant & Adv. Shri. P.R.Milton for the 2nd defendant and stood over to this day for consideration, the Tribunal delivered the following:
F I N A L O R D E R
Challenging the securitization measure initiated by the defendants under S.17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’) the applicant, claiming as a tenant over the subject matter property, has filed this SA seeking the relief to declare that the defendants cannot take possession of the subject matter property in a summary proceeding.
Brief facts of the case :
2.1 In the SA it is pleaded that the applicant being the Proprietor of M.R. Fabrics, Main Road, Kollam had taken lease of the subject matter property from defendant No.2 by Registered Lease Deed No.1118/1/2023 dated 08.06.2023 at a monthly rent of Rs.35,000/- for a period of 5 years. He is paying rent to the owner of the property regularly as per the terms and conditions of the lease deed.
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2.2 Defendant No.1 has filed an application bearing MC No. 800/2023 before the Chief Judicial Magistrate Court, Kollam to take possession of the secured asset. The Chief Judicial Magistrate Court, Kollam appointed an Advocate Commissioner to take possession of the subject matter property, which was mortgaged by the defendant No.2 to secure the loan availed by M/S Arafa Gold, a partnership firm. Now the Advocate Commissioner has issued a notice dated 31.05.2024 for eviction of the applicant in a summary proceeding. The possession of the applicant over the subject matter property is by virtue of a valid Lease Agreement and he cannot be evicted from the same, except as per the procedure prescribed under the law for eviction of tenant. Hence this SA is filed to declare the securitization proceeding initiated by the first defendant is not binding on the applicant and the first defendant may be directed not to evict the applicant from the subject matter property.
3.1 The 1st defendant filed written statement denying the averments. It is claimed that the Lease Agreement is not a valid document and based upon the same, the applicant cannot restrain the secured creditor in evicting him under the provision of SARFAESI Act. There is also restriction to create any lease document in respect of the secured asset. In violation of the terms
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and conditions of the agreement, the defendant No.2 created invalid lease deed which is not binding and hence the SA may be dismissed.
3.2 The 2nd defendant has appeared in this case. No written statement is filed by him.
FINDINGS:
Point Nos.(i) & (ii)
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So also taking measure under Section 13(4) of the SARFAESI Act is not disputed by the applicant in this proceeding. It is claimed by the applicant in this proceeding that he has taken the subject matter property by virtue of a registered Lease Deed bearing No.1118/1/2023 dated 08.06.2023 of Kollam SRO from the defendant No.2 for a period of 5 years and hence he cannot be evicted in a summary proceeding.
follows:
65A. Mortgagor’s power to lease.—
(1) Subject to the provisions of sub-section (2), a mortgagor, while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee.
(2) (a) Every such lease shall be such as would be made in the ordinary course of management of the property concerned, and in accordance with any local law, custom or usage,
(b) Every such lease shall reserve the best rent that can reasonably be obtained, and no premium shall be paid or promised and no rent shall be payable in advance,
(c) No such lease shall contain a covenant for renewal,
(d) Every such lease shall take effect from a date not later than six months from the date on which it is made,
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(e) In the case of a lease of buildings, whether leased it 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 with a time therein specified.
(3) The provisions of sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage-deed; and the provisions of sub-section (2) may be varied or extended by the mortgage-deed and, as so varied and extended, shall, as far as may be, operate in like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that sub-section.
In view of the statutory provision, the mortgagor can lease
out the mortgaged property which is in his lawful possession,
subject to compliance of conditions prescribed. To attract this provision, it is required to establish the essential ingredients for a valid lease as follows:
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Section 65A clause (3) stipulates that the power to create lease in respect of mortgaged property is available to the mortgagor if there is no contrary intention expressed in the mortgage deed and in violation of the terms and conditions of the mortgage the lease is not permissible.
Shyamsunder Agarwal Versus Central Bank of India 2019(9) SCC 94 analysed the right of tenant in respect of the secured asset and held as follows:-
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c) 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 Section 107 of the T.P. Act.”
Keeping the statutory provision and the ratio decided by the Hon’ble Apex Court, it is essential to find out whether the conditions as prescribed in the statute under Section 65A of the Transfer of Property Act, 1882 are fulfilled in execution of the impugned lease deed dated 08.06.2023 by the mortgagor in favour of the applicant.
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08.06.2023. The conditions for a valid lease as prescribed under Section 65A of the Transfer of Property Act is violated while executing the impugned deed and creation of lease for a period of 5 years is not permissible under the law. So also, as permission from the secured creditor, having not taken, the rent agreement is not binding on the defendant No.1 and he has right to proceed in the securitization proceeding.
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Section 65A(2) of the 1882 Act, appellants are not entitled to for protection from dispossession under Section 14 of the 2002 Act. The larger bench of the Hon’ble Apex Court in the judgment Bajarang Shyamsunder (supra ) has categorically held that, if a tenancy under law comes into existence after the creation of a mortgage, but prior to the issuance of notice under Section 13(2) of the SARFAESI Act, it must satisfy the conditions of Section 65A of the T.P. Act. Keeping in view of the ratio decided by the Hon’ble Apex Court and the Hon’ble High Court of Kerala; the materials available in this case are carefully scrutinized and it is found that conditions of granting valid lease by the mortgagor as prescribed under Section 65A of the Transfer property Act, 1882 are not complied in the impugned registered rent agreement dated 08.06.2023 and the same was executed without the written permission of the secured creditor (mortgagee) which is in violation of the restriction contained in the mortgage documents. Hence the applicant is not entitled for any protection based on the void and invalid rent agreement. The applicant has no right to retain the possession of the subject matter property and cannot restrain the secured creditor in proceeding with the securitization measure in respect of the said property. As the applicant is in unauthorized
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possession of the secured asset; he shall surrender the possession of the subject matter property to the 1st defendant within a period of one month from the date of passing of this judgement, failing which, the 1st defendant may proceed in accordance with law to take physical possession of the secured asset by evicting the applicant. In view of the discussions made above, both the points are answered against the applicant.
Hence it is Ordered:-
ORDER
11. In view of the foregoing reasons, this SA, being
devoid of any merit, is hereby dismissed with cost of Rs.10,000/(Rupees ten thousand only), payable by the applicant to the 1st defendant.
(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 17th day of July, 2025).
[SOVAN KUMAR DASH] PRESIDING OFFICER
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Documents on the part of the applicant
| Annexures | Date | Particulars of documents |
|---|---|---|
| Annexure-A1 | 20.10.2021 | True copy of the rent agreement entered by and between the applicant and the 2nddefendant. |
| True copy of registered Lease Deed | ||
| Annexure-A2 | 08.06.2023 | No. 1118/1/2023 of Kollam Sub Registry Office entered by and between the applicant and the 2nd defendant along with its English translation. |
| Annexure-A3 | True copy of Licence No. 140168092100391 issued by the Kollam Corporation under Section 447 of the Kerala Municipality Act, 1994 in the name of Navasudeen S., building No.3457. |
|
| Annexure-A4 | 14.12.2021 | The true copy of Registration Certificate issued by the Government of India. |
| Annexure-A5 | True copy of Goods and Service Tax payment receipt. |
|
| Annexure-A6 | True copy of the photograph of the shop rooms. |
|
| Annexure-A7 (series) |
True copy of the rent receipts issued by the 2nddefendant. |
|
| Annexure-A8 | 29.11.2023 | True copy of the Order in MC No.800/2023 of the Hon’ble Chief Judicial Magistrate Court, Kollam. |
| Annexure-A9 | True copy of MC No.800/2023 of the Hon’ble Chief Judicial Magistrate Court, Kollam filed under Section 14 of the SARFAESI Act, 2002. |
|
| Annexure-10 | 31.05.2024 | True copy of the notice issued by the Advocate Commissioner. |
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Documents on the part of the 1st defendant
| Annexure-B1 | 14.03.2014 | Sanction Letter. |
|---|---|---|
| Annexure-B2 series |
13.11.2019 | Sanction Letter. |
| Annexure-B3 | 29.06.2022 | Sanction Letter. |
| Annexure-B4 | 02.04.2014 | Letter of deposit of Title Deed. |
| Annexure-B5 series |
01.01.2015 | Letter of extension of deposit of title deed. |
| Annexure-B6 | 28.03.2018 | Letter of extension of deposit of title deed. |
| Annexure-B7 | 15.11.2019 | Letter of extension of deposit of title deed. |
| Annexure-B8 | 29.06.2022 | Letter of extension of deposit of title deed. |
| Annexure-B9 | 02.04.2014 | Letter of extension of deposit of title deed. |
| Annexure-B10 | 01.01.2015 | Letter of extension of deposit of title deed. |
| Annexure-B11 | 28.03.2018 | Letter of extension of deposit of title deed. |
| Annexure-B12 | 15.11.2019 | Letter of extension of deposit of title deed. |
| Annexure-B13 | 29.06.2022 | Letter of extension of deposit of title deed. |
| Annexure-B14 | Equitable Mortgage Register Extract (2916/97 and 84/2002) |
|
| Annexure-B15 | Equitable Mortgage Register Extract (2696/98) |
|
| Annexure-B16 | CERSAI certificate (0.82 Ares) | |
| Annexure-B17 | CERSAI certificate (0.75 Ares) | |
| Annexure-B18 | 17.10.2018 | Valuation Report. |
| Annexure-B19 | 27.10.2018 | Valuation Report. |
| Annexure-B20 | 12.10.2022 | Valuation Report. |
| Annexure-B21 | 24.08.2023 | Valuation Report. |
| Annexure-B22 | 31.01.2024 | Copy of the Amendment Application in SA 651/2024. |
| Annexure-B23 | Copy of the Writ Petition in WP (C) No.3807/2024. |
|
| Annexure-B24 | Copy of the Judgment in Writ Petition in WP (C) No.3807/2024. |
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Documents on the part of the 2nd defendant .. NIL.
PRESIDING OFFICER
IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM
PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER
Dated the 17th July, 2025
SA No.458/2024
Between
Navasudeen S., Aged 40 years, S/o. Shihabudeen, Proprietor, M.R. Fabrics, Residing at Dharul House, S.V. Nagar, Ayathil P.O., Pattathanam, Kollam–691 021. …Applicant
And
UCO Branch, Quilon Branch, Khaise Building, Beach Road, Quilon – 691 001, represented by its Chief Manager/ Authorised Officer & Another.
…Defendants
F I N A L O R D E R
2 issues framed by the court
Whether an applicant can retain possession of a secured asset based on a registered lease deed executed after the creation of security interest in violation of the mortgage terms?
Whether the lease deed satisfies the mandatory conditions of Section 65A of the Transfer of Property Act to protect the tenant from eviction under SARFAESI proceedings?
Colour shows how this judgement treated each authority
Bajarang Shyamsunder Agarwal Versus Central Bank of IndiaRelied on¶60
Bajarang Shyamsunder Agarwal Versus Central Bank of India, 2019(9) SCC 94 · Who else cites this
Kelukutty P.M and Others v Young Men's Christian AssociationReferred¶73
Kelukutty P.M and Others v Young Men's Christian Association and Another, 2016(1) KHC 853
Harshad Govardhan SondagarReferred¶73
Harshad Govardhan Sondagar, [2014] S.C.R 605 · Who else cites this
Vishal N. Kalsaria v Bank of IndiaReferred¶73
Vishal N. Kalsaria v Bank of India and Others, 2016 (1) KHC 330
3 provisions across 2 enactments
Navasudeen S.
UCO Bank Quilon Branch
Abdul Salam
Sovan Kumar Dash
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
Sovan Kumar Dash
Parties & counsel
