Bank is entitled to take actual possession of secured assets from borrower in terms of Section 13(4) of SARFAESI Act

The Chief Justice:

The petitioner has filed this petition for a mandamus forbearing the respondent from evicting the petitioner from the leasehold premises in its possession except by due process of law. The principal contention raised by the petitioner is that the petitioner being a tenant and in physical possession of a portion of the building situated in S.F.No.189/2, Uthupalayam Village, Palladam Taluk, Coimbatore District, by virtue of a lease deed dated 05.04.2003, duly executed by the principal borrower and the mortgager of the property M/s. Sree Lakshmi Foundry, is fully protected under the Tamil Nadu Lease and Rent Control Act and cannot be dispossessed without taking recourse to the provisions of the said Act. We need not narrate detailed facts, but it is suffice to state that M/s. Sree Lakshmi Foundry, who is the principal borrower had availed of some loans from the respondent-State Bank of India after mortgaging the land and building comprised in S.F.No.189/2 by executing a memorandum of mortgage in favour of the respondent bank. On the failure of the borrower to pay back the loan, the respondent bank had invoked the provisions of the Securitisation and Re-construction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act) and had taken symbolic possession of the entire property on 211. 2003. It is the case of the petitioner that a portion of the aforesaid property was originally leased to the petitioner under a lease deed dated 10.09.1986 and the lease was renewed by a subsequent lease deed dated 05.04.2003. The petitioner claims that an advance of Rs.2 lakhs was originally paid in cash and it was increased to Rs.4 lakhs at the time of the renewal of the lease which was also paid in cash. It is the further case of the petitioner that the respondent recognised the petitioners tenancy and addressed a letter dated 211. 2003 asking the petitioner to pay the rent. Accordingly the petitioner paid the rent in March 2005 by a demand draft and there are no arrears. The petitioner has alleged that on 14.03.2005 the officials of the respondent bank attempted to take forcible possession of the premises and in fact, the rear door was sealed by them. On 15.03.2005 the petitioner therefore lodged a complaint before the Soolur Police Station. In short, the contention of the petitioner is that a tenant cannot be dispossessed in pursuance of recovery proceedings against the borrower under the SARFAESI Act and therefore, even if the landlord of the petitioner is indebted to the respondent bank, the respondent has to take possession only by due process of law and it cannot mis-use its powers and try to take forcible possession.

2. Mr.M.S.Krishnan, learned counsel appearing for the petitioner strenuously contended that where the owner of a leased asset mortgages such asset to a bank in order to procure a loan, the bank can stake claim under Section 13(4) of the SARFAESI Act only to residuary right which continue to vest in the owner after the lease came into existence, which alone was offered as security to the bank. Learned counsel contended that there is nothing in the said Act to indicate that the legislature intended to take away the right of a tenant in the property. He contended that the right to property is a constitutional right and deprivation of such a right existing in favour of a person cannot be presumed in construing a statute. He contended that SARFAESI Act is enacted for the enforcement of security interests and not for its enlargement. He contended that such an interpretation to Section 13(4) would be unconstitutional. He contended that the State Legislature has enacted the Tamil Nadu Lease and Rent Control Act which is a beneficial legislature meant to protect the tenants from arbitrary eviction. In effect Rent Control Act overrides certain provisions of the Transfer of Property Act which governs the rights, duties and obligations of landlords and ten