Dismissed

Dr Ajmal K N v. South Indian Bank

DRT7 Mar 2025SA/770/2024

Case brief

AI extract

What is this about?

The Tribunal dismissed a securitization application filed by a Diagnostic Centre operator challenging a bank’s notice to vacate. Relying on Section 65A of the Transfer of Property Act and Bajarang Shyamsunder Agarwal, the court held that the lease was invalid as a tenant cannot claim possession without a registered instrument for a term exceeding a year. The application was dismissed with costs.

What did the court decide?

Applicants to surrender possession within one month; Applicants to pay costs of Rs.20,000/- to the 1st and 2nd defendants.

Dr Ajmal K N versus South Indian Bank — Company and Corporate | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA

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AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated this the 07^th day of March, 2025

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SECURITIZATION APPLICATION No.770/2024

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Between

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Dr. Ajmal K.N., Aged 30 years, S/o. Dr. K.M.Nazar, UCC College P.O., Kizhakke Kadungallur, Ernakulam District – 683 102.

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Dr. K.M. Nazar, Aged 59 years, S/o. Late Moideen Kutty, UCC College P.O., Kizhakke Kadungallur, Ernakulam District – 683 102. …Applicants

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And

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The Authorised Officer, The South Indian Bank Ltd., Regional Office, Irinjalakkuda, VI/950-B, Christ Nagar, AKP Junction, Irinjalakkuda North, Thrissur District – 680 125.

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The South Indian Bank Ltd., Pavizham Towers, Chandapura, Kodungallur, Thrissur District – 680 664.

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Mohammed Sageer T.K., Proprietor, M/s. Concord Towers, Lokamalleswaram, Chandapuzha, Kodungallur, Thrissur District – 680 668.

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Laila Mohammed Sageer, W/o. Mohammed Sageer T.K., Thaivalappil House, Uzhavathu Kadavu, Lokamalleswaram, Santhipuram P.O., Thrissur District – 680 668. …Defendants

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SA/770/2024

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This Securitization Application having been heard on 27.01.2025 in the presence of Advocate Santosh Kumar K for the applicant, Advocate Ruby P Poulose for the 1^st and 2^nd defendants and the Advocate Nekha Varghese for 3^rd and 4^th defendants, 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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This SA is filed by the third parties 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’) challenging the securitization measure initiated by the 1^st and 2^nd defendants for taking physical possession of the secured asset.

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Brief facts of the case :

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In the SA the applicants have pleaded that the defendants Nos.3 and 4 are the owners of the building which is the subject matter in this proceeding. The 2^nd floor of the building was leased out by the 3^rd and 4^th defendants to the applicants by a lease deed to run a Radiology Diagnostic Centre in the name and style ‘M/s. DDIC Scan and Diagnostics’ on receiving advance of Rs.15,00,000/-. The applicants spent an amount of Rs.60 lakhs to carry out some civil work to establish the Diagnostic Centre. The tenancy is continuing till today and the applicants have been paying rent regularly to the 3^rd and 4^th defendants. The applicants obtained clearance certificate from various statutory authorities and certificate

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SA/770/2024

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from the District Medical Officer, State Health Department to run the Diagnostic Centre. All the relevant documents are filed in this case.

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The applicants were served with a copy of the notice dated 05.09.2024 addressed to the defendant Nos.3 and 4 from one Advocate Commissioner informing them to vacate the said building within 15 days of the receipt of the said notice. It is learnt that the defendant Nos.1 and 2 initiated a proceeding under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate, Thrissur against the defendant Nos.3 and 4 to take possession of the building due to non-repayment of the loan by them, which was not within the knowledge of the applicants. Apprehending dispossession the applicants filed writ petition No.32992/2024 before the Hon’ble High Court of Kerala challenging the notice issued by the Advocate Commissioner. The said writ application was disposed permitting the applicant to raise the issue in proper forum after obtaining relevant documents from the Chief Judicial Magistrate Court. Hence this SA is filed challenging the measure initiated by the 1^st and 2^nd defendants to take possession of the subject matter property claiming that they have no right to evict the petitioners from the building as they are in possession of the said building on valid lease agreement.

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The 1^st and 2nd defendant contested the claim of the applicants by filing written statement contending inter alia that the defendant No.3 and 4 created security interest over the subject matter property in respect of the loan availed by them. After mortgaging the property, the defendant No.3 and 4 had no right to lease out the property without the knowledge of the defendants. Hence the claim of the applicants is not sustainable. All the statutory

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SA/770/2024

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measures are duly followed in proceeding in respect of the secured asset mortgaged by the defendant Nos.3 and 4. Hence any restraint order against these defendants will cause prejudice and they will be deprived to recover the outstanding amount. The applicants filed various cases before the Hon’ble High Court of Kerala and the same were dismissed. This is the third-round litigation initiated by the applicants without any valid ground. Hence the SA, being devoid of any merit, may be dismissed.

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The 3^rd and 4^th defendants have filed written statement denying the claim of tenancy by the applicants over the subject matter property. The tenancy created with the applicants is not extended after 15.10.2024. Hence the applicants have no valid ground to file this application claiming as tenants in the subject matter property. Hence the SA may be dismissed.

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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 applicants have any right to retain the possession of the secured asset?

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(ii) Whether the applicants are 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. There is no dispute about the mortgage of the subject matter

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SA/770/2024

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property by the 3^rd and 4^th defendants for securing the loan availed by them.

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The applicants claim that they are running a Diagnostic Centre on the 2^nd floor of the building based upon a lease deed dated 08.06.2018 executed by the defendant Nos.3 and 4. It appears from the documents filed by the defendant Nos.1 and 2 that the security over the subject matter property was created in the year 2017. The applicants had not produced the lease deed of the year 2018 to ascertain the terms and conditions of the lease agreement. No material is also filed showing continuance of tenancy in the subject matter property. Besides the same 3^rd and 4^th defendants have also disputed the claim of tenancy by the applicants.

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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

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SA/770/2024

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consequences, as if such variations or extensions were contained in that sub-section.

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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

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SA/770/2024

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violation of the terms and conditions of the mortgage the lease is not permissible.

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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

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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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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 lease deed. No such document is available to arrive at a conclusion about the claim of the applicants in respect of their tenancy claim over the subject matter property.

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SA/770/2024

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In view of the judgement of the larger bench of the Hon’ble Apex Court in the judgment Bajarang Shyamsunder (supra ) the applicants are not entitled for any protection. The applicants have 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 applicants are in unauthorized possession of the secured asset, they shall surrender the possession of the subject matter property to the 1^st and 2^nd defendants within a period of one month from the date of passing of this judgement failing which the 1^st and 2^nd defendants may proceed in accordance with law to take physical possession of the secured asset in accordance with the law. In view of the discussions made above, both the points are answered against the applicants.

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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 of any merit, is hereby dismissed with costs. Since the applicants, having created obstructions in the securitization proceeding by filing various litigations, are liable to pay cost of Rs.20,000/- (Rupees twenty thousand only) to the 1^st and 2^nd defendants.

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(Dictated to my steno, corrected and pronounced by me in the open Tribunal on this the 7^th day of March, 2025)

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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SA/770/2024

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Documents on the part of the Applicants

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Annexures	Particulars of documents
Annexure-A1	True copy of the clearance/Registration dated 05/03/2024 issued by the Atomic Energy Regulatory Board, New Delhi, which is valid upto 05/03/2029.
Annexure-A2	True copy of the Certificate dated 05/03/2024 issued by the Indian Medical Association (IMAGE), which is valid up to 31/03/2025.
Annexure-A3	True copy of the Clearance/Certificate of Registration dated 12/08/2024 issued by the District Medical Officer, Thrissur.
Annexure-A4	True copy of the License issued by the Kodungallur Municipality.
Annexure-A5	True copy of the Notice dated 05/09/2024 issued by the Advocate Commissioner in Crl.MP No.3349/2024.
Annexure-A6	True copy of the True English Translation of Annexure-A5 Notice.
Annexure-A7	True copy of Interim Order dated 13/09/2024 in W.P.(C) No.32992/2024.
Annexure-A8	True copy of the Crl.MP No.3349/2024 on the file of the Chief Judicial Magistrate Court, Thrissur.
Annexure-A9	True copy of the Affidavit in Crl.MP No.3349/2024 on the file of the Chief Judicial Magistrate Court, Thrissur.
Annexure-A10	True copy of the Order dated 18/03/2024 of the Chief Judicial Magistrate Court, Thrissur in Crl.MP No.3349/2024.

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Documents on the part of the 1^st and 2^nd Defendants

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Annexure-B1	Copy of the loan sanction letter dated 16.01.2017.
Annexure-B2	Copy of the letter confirming deposit of title deeds with respect to the property in favour of the 2^nddefendant by the 3^rddefendant.
Annexure-B3	Copy of CERSAI Registration.
Annexure-B4	Copy of the Judgment dated 14.10.2024 of the Hon’ble High Court of Kerala in W.P.(C) No.32992/2024.
Annexure-B5	Copy of the Judgment dated 28.10.2024 in O.P. (Crl.) No.749/2024.
Annexure-B6	Copy of the Judgment dated 06.11.2024 in W.P.(C) No.38446/2024 of the Hon’ble High Court of Kerala.

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SA/770/2024

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Documents on the part of the 3^rd and 4^th Defendants

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Annexure-D3(a)	True copy of the Judgment dated 14.10.2024 in W.P.(C) No.32992/2024 on the files of Hon’ble High Court of Kerala.
Annexure-D3(b)	True copy of the plaint dated 21.10.2024 in O.S. No.922/2024 on the files of Hon’ble Munsiff Court, Kodungallur.
Annexure- D3(c)	True copy of the Order dated 21.10.2024 in IA No. 1/2024 in OS No.922/2024 on the files of Hon’ble Munsiff Court, Kodungallur.