1. Secured asset possession under SARFAESI Act — Claim of tenancy via unregistered agreement — High Court direction to restore possession to tenant. (Para 2 , 4 , 5 , 7 , 8 )
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2025 Supreme(SC) 1065
SUPREME COURT OF INDIA
Pamidighantam Sri Narasimha, Joymalya Bagchi, JJ.
PNB Housing Finance Limited - Appellant
Versus
Sh. Manoj Saha & Anr. - Respondents
Civil Appeal No. 9492 of 2025 (Arising out of SLP (C) No. 7288 of 2024)
Decided On : 15-07-2025
Advocates appeared:
For the Petitioner(s): Mr. Shikhil Suri, Sr. Adv. Mr. R. N. Keswani, AOR Mr. Ramesh N. Keswani, Adv. Mr. Pranav Singal, Adv. Mr. Ravi Raghunath Vachher, Adv. Mr. Mr. Arjun Vachher, Adv. Mr. Vinayak Sharma, Adv. Mr. Akshat Vachher, Adv. Mr. Saurabh Jha, Adv. Mr. Rahul, Adv.
For the Respondent(s): Mr. Jaideep Gupta, Sr. Adv. Mr. Siddharth, AOR Ms. Racheeta Chawla, Adv. Ms. Riddhi Bose, Adv. Ms. Sampriti Baksi, Adv. Mr. Rishi Aggarwal, Adv. Mr. Prateek Goyal, Adv. Mr. Harshit Manwani, Adv.
For the Petitioner(s): Mr. Shikhil Suri, Sr. Adv. Mr. R. N. Keswani, AOR Mr. Ramesh N. Keswani, Adv. Mr. Pranav Singal, Adv. Mr. Ravi Raghunath Vachher, Adv. Mr. Mr. Arjun Vachher, Adv. Mr. Vinayak Sharma, Adv. Mr. Akshat Vachher, Adv. Mr. Saurabh Jha, Adv. Mr. Rahul, Adv.
For the Respondent(s): Mr. Jaideep Gupta, Sr. Adv. Mr. Siddharth, AOR Ms. Racheeta Chawla, Adv. Ms. Riddhi Bose, Adv. Ms. Sampriti Baksi, Adv. Mr. Rishi Aggarwal, Adv. Mr. Prateek Goyal, Adv. Mr. Harshit Manwani, Adv.
The court ruled that tenants must provide substantial evidence of tenancy, especially when claiming rights under SARFAESI, and that High Court's intervention in such cases is limited.
Headnote:(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Sections 13(2), 13(4), 14, 17(4A) - High Court's jurisdiction - The High Court erroneously directed restoration of possession of secured asset to tenant despite existence of statutory remedy under SARFAESI. (Paras 11, 12, 24)
(B) Tenancy Rights - The tenant's claim based on an unregistered agreement was insufficient to establish a compelling case of prior tenancy; mere reliance on post-notice rent deposits did not substantiate his claims. (Paras 23, 26)
Facts of the case:
Appellant took possession of secured asset due to non-payment of loan by 2nd Respondent. 1st Respondent claimed tenancy but failed to provide evidence of prior tenancy rights. High Court restored possession, which was contested by Appellant.
Findings of Court:
The High Court's order was set aside due to failure to consider the lack of compelling evidence of tenancy and the tenant's indifferent conduct in protecting his interests.
Issues: Whether the tenant's claim of prior tenancy was valid and if the High Court had jurisdiction to restore possession despite existing statutory remedies under SARFAESI.
Ratio Decidendi: The court emphasized that tenants claiming rights through unregistered agreements must provide substantial evidence of tenancy. The High Court's intervention was unwarranted given the statutory framework of SARFAESI.
Result: Appeal allowed; High Court's order set aside.
Legal Category Hierarchy
- banking law
- property law
- practice and procedure
Table of Contents
2. Maintainability of High Court petition despite alternative remedy under SARFAESI Act — Protection of tenancy rights under Rent Control laws against SARFAESI measures. (Para 11 , 14 )
3. High Court erred in entertaining petition despite statutory remedy — Tenant failed to provide possessory evidence of tenancy prior to demand notice. (Para 12 , 13 , 23 , 24 , 25 )
4. Oral or unregistered tenancies do not continue beyond one year from issuance of notice under Section 13(2) of SARFAESI Act. (Para 15 , 18 )
5. Appeal allowed — High Court order set aside — Status quo maintained pending disposal of securitization application by Debt Recovery Tribunal. (Para 26 )
6. What is the statutory remedy available to tenants or lessees against possession measures under the SARFAESI Act?
Under Section 17(4A) of the SARFAESI Act, persons claiming to be lessees or tenants can approach the Debt Recovery Tribunal (DRT) to challenge measures under Section 13(4), including the taking of possession, with the order being appealable under Section 18. (Para 12 )
7. How does the SARFAESI Act affect tenancies created through oral or unregistered agreements?
Tenancies created via oral or unregistered agreements cannot continue beyond one year from the issuance of the demand notice under Section 13(2) of the SARFAESI Act, after which the tenant is deemed a tenant in sufferance. (Para 15 , 18 )
8. What evidence must a tenant provide to establish a valid tenancy when claiming protection against SARFAESI measures?
The onus lies on the tenant to produce independent and convincing possessory evidence, such as rent receipts, property or water tax receipts, and electricity charges, to establish the creation of a valid tenancy. (Para 18 , 23 )
9. Can a High Court exercise jurisdiction under Article 226/227 to restore possession of a secured asset to a tenant?
High Courts are deprecated from interfering under Article 226/227 in SARFAESI matters when a statutory remedy exists, particularly after the introduction of Section 17(4A) enabling tenants to approach the DRT. (Para 12 , 13 )
JUDGMENT :
Joymalya Bagchi, J.
1. Leave granted.
2. Appellant has assailed the judgment and order passed by High Court whereby the secured asset1[Space of 450 sq.ft. on first floor, 1 Allenby Road, Kolkata – 700020] whose possession was taken by the Appellant, was directed to be handed back to the 1st Respondent.
3.1st Respondent claims to be a tenant of the secured asset. He had entered into an unregistered tenancy agreement with M/s Janapriya Finance and Industrial Investment (India) Pvt. Ltd2[Original landlord] fora period of 5 years. In 1992, the term of tenancy expired. But 1st Respondent alleged he continued as a monthly tenant under the original landlord. In 2007, the original landlord sold the secured asset to 2nd Respondent. By letter of attornment dated 04.03.2008, 2nd Respondent that is, the new landlord called upon 1st Respondent to pay rent. 1st Respondent contends he paid rent to 2nd Respondent and continued to occupy the secured asset as a tenant.
4. On 09.02.2017, 2nd Respondent took a loan from the Appellant against creation of security interest on the premises. A second loan was also taken. The loan account was not serviced and became a NonPerforming Asset (NPA). Demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20023[hereinafter referred to as, ‘SARFAESI’] was issued to the 2nd Respondent on 13.07.2021, requiring the latter to pay Rs.3,09,65,636.97/ along with applicable future interest and charges within 60 days. The notice further stated that, in the event of nonpayment, the secured creditor would initiate measures under Section 13(4) of SARFAESI, including taking possession and sale of the secured asset. Despite such intimation, no payment was made within 60 days of receipt of notice. In the meantime, 2nd Respondent instituted an ejectment suit against 1st Respondent on various grounds, including non payment of rent.
5. On 02.12.2021, symbolic possession of the secured asset was taken by the Appellant under section 13(4) of SARFAESI. As per Rule 8 (1) and (2) of the Security Interest (Enforcement) Rules, 2002, notice of symbolic possession was published in two leading newspapers and also affixed on a conspicuous part of secured asset.
6. 2nd Respondent filed a securitization application4[No.139/2022] before Debt Recovery Tribunal5[hereinafter referred to as, ‘DRT’] III, Kolkata challenging the recovery measures initiated under section 13(4) of SARFAESI.
7. On 08.04.2022, Appellant filed an application under section 14 of SARFAESI, seeking assistance of District Magistrate to take physical possession of the secured asset. District Magistrate allowed the application and directed Deputy Magistrate to take possession of the secured asset. However, DRT by order dated 09.11.2022, directed the Appellant to serve prior notice to 2nd Respondent before taking physical possession. Accordingly, on 19.07.2023 intimation was given to 2nd Respondent with regard to taking over possession of the secured asset. Similar notice was also pasted on the secured asset. On 02.08.2023, physical possession was taken by the Deputy Magistrate and handed over to the Appellant.
8. On 23.08.2023, 1st Respondent informed the Appellant he was a tenant of the secured asset and called upon the latter to hand over documents on the basis of which possession of secured asset was taken. Thereafter, 1st Respondent filed a securitization application6[No.737/2023], inter alia, praying for various reliefs including handing back possession of the secured asset. An interim application7[No.2331/2023] seeking stay of notice dated 02.08.2023 under section 13(4) and other reliefs was also filed.
9. After hearing the parties, DRT held the claim of tenancy was based on an unregistered instrument. Neither borrower nor the tenant had intimated the Appellant about the tenancy at the time of creation of mortgage. Given these facts, in view of Harshad Govardhan Sondagar v. Intern
