2008 Supreme(Guj) 79

2008 (3) GCD 1696 (Guj)
Hon’ble Mr. Justice Akil Kureshi
Dena Bank [Bhavnagar]
Versus
Shri Sihor Nagarik Sahakari Bank Limited & Ors.
Special Civil Application No. 29845 of 20071—Decided on 28-29/02/2008

Important Point :
Whether secured creditor is entitled to possession of secured asset in possession of tenant from time much before creditor advanced loan?

Headnote:Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002—Sections 13, 13(1) to 13(4), 14, 17, 17(1), 18, 34 and 35—Security Interest (Enforcement) Rules—Rules 8, 8(1) to 8(3), 8(6), 9, 9(7) and 9(10) — Premises under tenancy—Mortgaged—Mortgagee taking possession—Use of force against tenant—Sustainability—Finding of—Respondent No. 2 obtained loan from Respondent No. 1 a Co-operative Bank and mortgaged the premises in which branch of petitioner Bank is situated—On account of non-payment of loan by Respondent No. 2, Respondent No. 1 initiated action under the Act of 2002—He after issuance of legal notice proceeded to take vacate possession of the premises in possession of petitioner by force—The facts that emerge show that tenancy of the petitioner Bank existed nearly 10 years before Respondent No. 1 released loan in favour of Respondent No. 2 by creating a charge over the tenanted property and the same was done by Respondent No. 1 with full knowledge of the pre-existing tenancy in the circumstances Court opined that it is not open for Respondent No. 1 Bank to evict the petitioner Bank and take possession of secured assets free from occupation under the Act of 2002 or any other provision of law—However, upon satisfying certain conditions secured creditor is entitled to take possession of the secured asset but it does not mean to take vacant possession of the secured asset—He cannot summarily evict a pre-existing tenant and extinguish his tenancy contrary to contract between the parties or Rent Act applicable particularly when such tenancy was known to the secured creditor before advancement of loan to borrower Respondent No. 2—Court held that the attempt of Respondent No. 1 to evict the petitioner did not have legal force—Court, therefore, dispose of the petition with certain directions.

       Held :

       It would appear that though under Sub-section (4) of Section 13 of the Securitisation Act upon satisfying certain conditions it would be open for the secured creditor to take possession of the secured asset, such power does not necessarily under all circumstances, include power to take vacant possession of the secured asset. In other words while asserting its rights under Section 13(4) of the Securitisation Act, it is not open to the secured creditor to summarily evict, a pre-existing tenant, and thereby extinguish his tenancy contrary to contract between the landlord and the tenant or the Rent Act applicable particularly when such tenancy was known to the secured creditor before advancement of loan to the borrower. It may be noted that the Securitisation Act gives sweeping powers to Banks and Financial Institutions who are not necessarily nationalized Banks to recover their debts. Such powers include enforcement of security rights without recourse to Court of law. Nothing under the Securitisation Act, however, empowers the secured creditor to extinguish a tenancy which is admittedly shown to be existing before the advancement of loan to the borrower and of which the loaner had prior knowledge. [Para 25]

       In view of the matter, despite overriding effect given to the provisions contained in the Securitisation Act under Section 35 over any other law for the time being in force, Court does not find that the Act empowers the secured creditor to extinguish a preexisting tenancy. In so far as present factual situation is concerned, Court finds that there is nothing inconsistent in the Bombay Rent Act with Securitisation Act so as to give overriding effect to the provisions contained in the Securitisation Act. Overriding effect can be given when it is pointed out that the provisions of the other Act (Bombay Rent Act in the present case) are inconsistent with the provisions of the Securitisation Act. Since Court finds that nothing contained in the Securitisation Act empowers the secured creditor to extinguish an admitted preexisting tenancy, Court does not find that the provisions in this regard contained in the Securitisation Act are in any manner inconsistent with the Bombay Rent Act. [Para 27]

       This being the situation, that it is wholly impermissible for the District Magistrate to authorize use of force to evict the petitioner from the tenanted premises. Since it was not open for Respondent No. l secured creditor to seek eviction of the petitioner from the tenanted premises, it was equally impermissible for the District Magistrate to authorize such an action through use of force in purported exercise of powers under Section 14 of the Securitisation Act. The Magistrate could have authorized only such act which the secured creditor was otherwise authorized to take in furtherance of the provisions of Sub-section (4) of Section 13 or any other provisions of the Securitisation Act. When it was not open for the secured creditor to extinguish the tenancy and to seek eviction of the tenant, in the facts of the present case, such action cannot be legally enforced in term of provisions contained in Section 14 of the Securitisation Act. [Para 28]

       Petition Allowed