Breathing Space Granted to Tenant Facing Eviction Under Securitization Act - 2024-02-27

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Breathing Space Granted to Tenant Facing Eviction Under Securitization Act

In a recent judgement, the Kerala High Court granted a breathing space to a tenant facing eviction under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

Background:

The petitioner, who runs a business in a rented showroom, approached the court seeking protection from eviction. The landlord had mortgaged the property to UCO Bank, and the bank had initiated proceedings to recover the loan amount by selling the property. The petitioner argued that she was a registered tenant and was entitled to statutory remedies under Section 17(4A) of the SARFAESI Act.

Arguments Presented:

The petitioner contended that she had been running the business in the showroom since 2021 and had obtained a registered rent deed. She argued that she was willing to pay the outstanding amount to the bank or any person suggested by the bank.

The bank, represented by the Standing Counsel, opposed the petition. The bank argued that the mortgage of the property was prior to the petitioner's tenancy and that the petitioner had no registered tenancy at the time of taking possession. The bank also stated that the property had been sold to a third party and that the petitioner was hand in glove with the borrower and the guarantor.

Court's Analysis and Reasoning:

The court noted that the petitioner had obtained a GST registration for the business prior to the issuance of the Section 13(2) notice under the SARFAESI Act. The court also considered the fact that the petitioner had a registered lease deed, although it was executed after the mortgage of the property.

The court observed that tenants like the petitioner now have a statutory remedy under Section 17(4A) of the SARFAESI Act, which allows them to approach the Debts Recovery Tribunal for relief. The court held that in the interest of justice, the petitioner should be granted a breathing space to move the Debts Recovery Tribunal.

Decision:

The court disposed of the writ petition by directing the respondents to defer coercive proceedings, including eviction, for a period of 14 days. The court clarified that no further time would be granted to the petitioner in this regard.

This judgement highlights the importance of statutory remedies available to tenants facing eviction under the SARFAESI Act. It also emphasizes the court's willingness to grant reasonable time to tenants to seek appropriate legal recourse.