Dismissed

Joy Thomas v. Uco Bank

DRT17 Jul 2025SA/688/2024

Case brief

AI extract

What is this about?

The Tribunal dismissed the applicant's application challenging possession measures under SARFAESI. The court held that a lease executed after mortgage creation without secured creditor consent and violating Section 65A of the Transfer of Property Act is invalid, granting no protection against eviction.

What did the court decide?

Application dismissed with costs; Applicant to surrender possession of the secured asset within one month of this judgment.

Joy Thomas versus Uco Bank — Landlord and Tenant | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated this the 17^th day of July, 2025

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SECURITISATION APPLICATION NO.688/2024

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Between

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Joy Thomas, Aged 58 years, S/o. Thomas, Manager, MDRC Scans & Health Care Private Limited, Residing at Kizhakel House, Meenachil, Poovarani P.O., Kottayam – 686 577. …Applicant

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And

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Uco Bank, Quilon Branch, Khaise Building, Brach Road, Quilon – 691 001. Represented by its Chief Manager/ Authorised Officer.

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Abdul Salam, Aged 66 years, S/o. Kochukunju, Residing at Kodiyil Veedu, Sasthamcotta, Mynagappally, Kollam, PIN 690 521.

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Rameela Beevi, Aged 64 years, W/o. Abdul Salam, Residing at Kodiyil Veedu, Sasthamcotta, Mynagappally, Kollam, PIN – 690 521.

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SA 688/2024

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Rameez A., Aged 29 years, S/o. Abdul Salam, residing at Kodiyil Veedu, Sasthamcotta, Mynagappally, Kollam, PIN 690 521. …Defendants

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This Securitization Application having been heard on 23.06.2025 in the presence of Advocate Shri. Jojo George for the applicant and Advocate Shri. Deepak Joy K. and Angel Jacob for the defendant No.1 and Advocate Shri. P.R.Milton for the defendant Nos.2 to 4 and stood over to this day for consideration, the Tribunal delivered the following:

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F I N A L O R D E R

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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.

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SA 688/2024

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Brief facts of the case :

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2.1 In the SA it is pleaded that the applicant, being the Manager of MDRC Scans & Health Care Private Limited, has taken lease on the subject matter property from defendant Nos.2 to 4 by a Registered Rent Agreement No.1935/2023 dated 29.05.2023 at a monthly rent of Rs.50,000/- for a period of 5 years. He is paying rent to the owners of the property regularly as per the terms and conditions of the Rent Agreement.

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2.2 Defendant No.1 has filed an application bearing MC No. 296/2024 before the Chief Judicial Magistrate Court, Alappuzha to take possession of the secured asset. The Chief Judicial Magistrate Court, Alappuzha appointed an Advocate Commissioner to take possession of the subject matter property, which was mortgaged by the defendant Nos.2 to 4 to secure the loan availed by M/s. Zoya Gold. Now the Advocate Commissioner has issued a notice dated 14.09.2024 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

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SA 688/2024

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applicant and the first defendant may be directed not to evict the applicant from the subject matter property.

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3.1 The 1^st 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 and conditions of the agreement, the defendant Nos.2 to 4 created invalid lease/rent deed which is not binding and hence the SA may be dismissed.

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3.2 Defendant Nos.2 to 4 have also filed a separate written statement supporting the claim of the applicant and contended that as per the valid Registered Lease Agreement the applicant was inducted as a tenant over the subject matter property. The lease deed is in accordance with Section 65A of the Transfer of Property Act, 1882. The Order passed by the Chief Judicial magistrate Court, Alappuzha cannot be enforced against the applicant and hence till expiry of the tenancy the defendant No.1 cannot evict the applicant from the subject matter property. Hence the SA may be allowed.

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SA 688/2024

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From the respective case of the applicant and the defendants, the following points are emerged for adjudication in this case:

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(i) Whether applicant has any right to retain the possession of the secured asset on the basis of a registered rent agreement bearing No.1935/2023 dated 29.05.2023 of Alappuzha SRO executed by the 2^nd , 3^rd and 4^th defendants after creation of the security interest in favour of the 1^st defendant?

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(ii) Whether the applicant is entitled to get any relief in this SA?

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FINDINGS:

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Point Nos.(i) & (ii)

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For the sake of convenience, both the points, being interlinked with each other are taken up together for adjudication. Admittedly the subject matter property was mortgaged with the first defendant by the defendant Nos.2 to 4 to secure the loan availed by M/s.Zoya Gold. Issuance of the demand notice dated 09.06.2023 by the defendant No.1 to the borrower and guarantors is not disputed. 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 No.1935/2023 dated 29.05.2023 registered at Alappuzha SRO from the defendant Nos.2 to 4 for a period of 5 years.

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SA 688/2024

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The question arises whether on the basis of such lease deed the applicant can restrain the secured creditor defendant No.1 in evicting him from the subject matter property?

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Section 65A of the Transfer of Property Act reads as

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follows:

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65A. Mortgagor’s power to lease.—

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(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.

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(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,

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(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,

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(c) No such lease shall contain a covenant for renewal,

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(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.

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(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.

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SA 688/2024

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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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(i) The lease by the mortgagor was created in ordinary course of management of property concerned and in accordance with any local law, custom or usage.

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(ii) Such lease shall reserve the best rent that can reasonably be obtained,

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(iii) No premium shall be paid or promised and no rent shall be paid in advance.

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(iv) No such lease shall contain a covenant for renewal.

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(v) Every such lease shall take effect from a date not later than 6 months from the date it is made.

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(vi) In case of building the duration of lease shall not exceed 3 years and the deed shall contain a covenant for rent and condition of re-entry if the rent is not paid within a time there in specified.

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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.

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SA 688/2024

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8. The Hon'ble Apex Court in case of Bajarang

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Shyamsunder Agarwal Versus Central Bank of India 2019(9)

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SCC 94 analysed the right of tenant in respect of the secured asset and held as follows:-

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"25. In our view, the objective of SARFAESI Act, coupled with the T.P. Act and the Rent Act are required to be reconciled herein in the following manner:

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a) If a valid tenancy under law is in existence even prior to the creation of the mortgage, the tenant’s possession cannot be disturbed by the secured creditor by taking possession of the property. The lease has to be determined in accordance with Section 111 of the TP Act for determination of leases. As the existence of a prior existing lease inevitably affects the risk undertaken by the bank while providing the loan, it is expected of Banks/Creditors to have conducted a standard due diligence in this regard. Where the bank has proceeded to accept such a property as mortgage, it will be presumed that it has consented to the risk that comes as a consequence of the existing tenancy. In such a situation, the rights of a rightful tenant cannot be compromised under the SARFAESI Act proceedings.

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b) 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 has to satisfy the conditions of Section 65A of the T.P. Act .

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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.”

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SA 688/2024

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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 29.05.2023 by the mortgagor in favour of the applicant.

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It is not disputed by the defendant Nos.2 to 4 regarding creation of the security interest over the subject matter property. In the sanction letter issued by defendant No.1 filed with the written statement there is standard covenant in creating any further charge, lien or encumbrance over the assets and properties in favour of any other bank, financial institutions or any person. This sanction letter is not disputed by the applicant and defendant No.2 to 4. In view of the terms and conditions of the mortgage, the borrower or the guarantor has no right to create any encumbrance in favour of a third party/applicant without written permission from the secured creditor. Despite such condition the defendant No.2 to 4 created Registered Rent Agreement in favour of the applicant on 29.05.2023. 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

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SA 688/2024

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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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In a judgment of the Division Bench of the Hon’ble Kerala High Court in the case of Kelukutty P.M and Others v Young Men’s Christian Association and Another reported in 2016(1) KHC 853, cited by the learned counsel for the applicant, analyzed the scope and power of valid lease by the mortgagor as prescribed under Section 65A of the Transfer of Property Act,1882 and by referring the judgment of the Hon’ble Apex Court in the case of Harshad Govardhan Sondagar reported in [2014] S.C.R 605 and the case of Vishal N. Kalsaria v Bank of India and Others reported in 2016 (1) KHC 330 held that the lease in favour of the tenant for a period ranging from 51 to 99 years after commencement of the mortgage is against the conditions prescribed in Section 65A of the Transfer of Property Act and the lease in favour of the appellants not being in accordance with 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

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SA 688/2024

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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 21.05.2023 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 possession of the secured asset; he shall surrender the possession of the subject matter property to the 1^st defendant within a period of one month from the date of passing of this judgement, failing which, the 1^st defendant may proceed in accordance with law to take physical possession of the secured asset by evicting the

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SA 688/2024

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applicant. In view of the discussions made above, both the points are answered against the applicant.

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Hence it is Ordered:-

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ORDER

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In view of the foregoing reasons, this SA, being devoid

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of any merit, is hereby dismissed with costs of Rs.10,000/- (Rupees ten thousand only), payable by the applicant to the 1^st defendant.

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(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 17^th day of July, 2025).

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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Documents on the part of the applicant

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Annexures	Date	Particulars of documents
Annexure-A1	29.05.2023	True copy of registered Rent Agreement No.1935/2023, Alappuzha Sub Registry Office along with its English Translation.
Annexure-A2		True copy of Licence No.
		130185242300483 issued by the Alappuzha Municipality under Section 447 of the Kerala Municipality Act, 1994.
Annexure-A3 (series)		True copy of the statement of Account regarding the payment of rent.
Annexure-A4	06.05.2024	True copy of the Order in MC No. 296/2024 of the Hon’ble Chief Judicial Magistrate Court, Alappuzha.
Annexure-A5		True copy of MC No.296/2024 of the Hon’ble Chief Judicial Magistrate Court, Alappuzha filed under Section 14 of the SARFAESI Act, 2002.
Annexure-A6	14.09.2024	True copy of the notice issued by the Advocate Commissioner.

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Documents on the part of 1^st defendant

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Annexure-B1 07.05.2018	Sanction Letter.
Annexure-B2 31.10.2022	Sanction Letter.
Annexure-B3 09.05.2018	Letter of deposit of Title Deed.
Annexure-B4 10.07.2020	Letter of deposit of Title Deed.
Annexure-B5	Equitable Mortgage Register Extract.
Annexure-B6	CERSAI Registration Certificate.
Annexure-B7 12.08.2023	Valuation Report.
Annexure-B8 17.01.2018	Valuation Report.

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Documents on the part of defendants 2 to 4: NIL

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PRESIDING OFFICER

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated the 17^th July, 2025

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SA No.688/2024

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Between Joy Thomas, Aged 58 years, S/o. Thomas, Manager, MDRC Scans & Health Care Private Limited, Residing at Kizhakel House, Meenachil, Poovarani P.O., Kottayam–686577. …Applicant

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And

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Uco Bank, Quilon Branch, Khaise Building, Brach Road, Quilon – 691 001, Represented by its Chief Manager/ Authorised Officer & Another.

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…Defendants

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F I N A L O R D E R

Joy Thomas v. Uco Bank

Case brief

What is this about?

What did the court decide?

Joy Thomas v. Uco Bank

Case brief

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