2016 Supreme(Ker) 77

IN THE HIGH COURT OF KERALA AT ERNAKULAM
Ashok Bhushan, A.M. Shaffique, JJ.
P.M. Kelukutty & Others - Petitioners
Versus
Young Men's Christian Association & Others - Respondents
W.A. Nos.135, 156 & 158 of 2016
Decided On : 11-02-2016

Leases executed after the mortgage must conform to the provisions of Section 65A(2) of the Transfer of Property Act, 1882.

Headnote:

The Court held that the leases executed in favor of the appellants after the mortgage were not valid leases and were contrary to Section 65A(2) of the Transfer of Property Act, 1882. The Court further held that the appellants were not entitled to protection from dispossession under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Court also held that the application filed by the secured creditor under Section 14 of the 2002 Act was not barred by limitation.

Fact of the Case:

The appellants were lessees of properties that were mortgaged by the first respondent to the second respondent. The second respondent initiated proceedings under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (2002 Act) to take possession of the properties. The appellants filed objections before the learned Chief Judicial Magistrate, who issued an order directing eviction of the appellants from the properties. The appellants challenged the order before the High Court, which dismissed the writ petitions. The appellants then filed appeals before the Supreme Court.

Finding of the Court:

The Supreme Court held that the leases executed in favor of the appellants after the mortgage were not valid leases and were contrary to Section 65A(2) of the Transfer of Property Act, 1882. The Court further held that the appellants were not entitled to protection from dispossession under Section 14 of the 2002 Act. The Court also held that the application filed by the secured creditor under Section 14 of the 2002 Act was not barred by limitation.

Issues: 1. Whether the agreement dated 27.12.2004, Ext.P3, which is an unregistered document can be treated to be a mortgage deed or an integral part of the mortgage coupled with memorandum dated 31.12.2004 by which mortgage was created by deposit of title deeds and the agreement dated 27.12.2004 being unregistered can be relied for any purpose? 2. Whether the leases executed in favour of the petitioners by the 1st respondent which are leases subsequent to the execution of the mortgage can be held to be lease agreements with permission of the mortgagee, i.e., the 2nd respondent? 3. Whether the lease granted by the mortgagor after execution of the mortgage has to be in accordance with the provisions of Section 65A(2) of the Transfer of Property Act unless any contrary intention is not expressed in the mortgage deed? 4. Whether consent of the mortgagee for execution of the lease after mortgage, if presumed, can the consent be treated to be a consent for execution of lease in disregard to the conditions as enumerated in Section 65A(2)? 5. Whether in the facts of the case, petitioners could not have been dispossessed in a proceeding under Section 14 of the 2002 Act or for the dispossession of the petitioners, it was incumbent upon respondents 1 and 2 to institute proceedings for eviction under the Kerala Rent Laws? 6. Whether the application filed by the 2nd respondent under Section 14 of the 2002 Act was barred by limitation? 7. Whether on principle of estoppel, the respondents were estopped from dispossessing the petitioners from the premises they having taken advance from the petitioners for repayment of the loan? 8. To what relief, if any, the appellants are entitled?

Ratio Decidendi: The Court held that the leases executed in favor of the appellants after the mortgage were not valid leases and were contrary to Section 65A(2) of the Transfer of Property Act, 1882. The Court further held that the appellants were not entitled to protection from dispossession under Section 14 of the 2002 Act. The Court also held that the application filed by the secured creditor under Section 14 of the 2002 Act was not barred by limitation.

Final Decision: The Supreme Court dismissed all the appeals reserving the right of appellants to seek refund of interest free security paid to the mortgagor at the time of execution of the lease.