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2011 (2) CTC 474, 2011 (2) LW 521
High Court of Judicature at Madras
D. MURUGESAN & S. NAGAMUTHU
Indian Bank Adyar Branch represented by its Authorised Officer/Assistant General Manager
Versus
M/s Nippon Enterprises South represented by its Partner Chetan Acharya & Others
W.P.Nos.23850 & 27432 of 2010 & M.P.Nos.1 & 2 of 2010
Decided on : 08-03-2011
SARFAESI ACT - SECTION 31(E) - APPLICABILITY - LEASE NOT REGISTERED UNDER SECTION 107 OF THE TRANSFER OF PROPERTY ACT - SECTION 35 - OVERRIDING EFFECT - SECTION 69(2) OF THE PARTNERSHIP ACT - APPLICABILITY - UNREGISTERED PARTNERSHIP FIRM - MAINTAINABILITY OF APPLICATION.
Fact of the Case:
M/s Elke Enterprises had availed certain financial facilities from the bank amounting to a sum of Rs.6,50,00,000/- under open cash credit facility and packing credit facility under the sanction ticket dated 16.10.2007. Those financial facilities were duly secured by creating equitable mortgage over the immovable properties belonging to one Mr.Shyam Narain and Mr.Bharat Shyam Narain situate at Laxmi Narain Towers at Door Nos.71 & 72, Wallajah Road, Triplicane, Chennai. Both the said Shyam Narain and Bharat Shyam Narain stood also as personal guarantors for the financial facilities and created an equitable mortgage by way of deposit of original title deeds with the bank on 10.1.2008. M/s Nippon Enterprises South claims to be the tenant in occupation of the entire ground floor and Shop Nos.B3 & B4 in the basement of the said property. Petitioners in M.P.No.2 of 2010 in W.P.No.23850 of 2010 are the employees of the tenant.
Finding of the Court:
1. Section 31(e) of the SARFAESI Act is not applicable to the facts of the present case. It is not every lease which will make the provisions of the Act inapplicable. It is only a lease in which no security interest has been created which alone makes the provisions of the Act inapplicable. 2. The SARFAESI Act has got overriding effect over the TN Rent Control Act in view of the provisions of Section 35 and therefore the rights said to have been accrued in favour of the tenant under the TN Rent Control Act cannot be enforced as against the bank while the bank invokes the provisions of the SARFAESI Act. 3. The application filed by the tenant before the Debts Recovery Tribunal is not barred under Section 69(2) of the Partnership Act and is maintainable.
Issues: 1. Can a lessee/tenant in bona fide occupation of a secured asset for more than a period of one year, could claim the benefit of the lease under Section 31(e) of the SARFAESI Act, in the event there was no registration of the lease deed as required under Section 107 of the Transfer of Property Act? 2. Whether, in terms of Section 35, the SARFAESI Act will override the provisions of the Tamil Nadu Buildings (Lease & Rent Control) Act, 1960, to enable the bank to evict a tenant and take physical possession of the secured asset either by invoking Section 13(4) or Section 14 of the SARFAESI Act? 3. Whether an unregistered partnership firm is entitled to maintain an application before the Debts Recovery Tribunal in view of the bar under Section 69(2) of the Partnership Act?
Ratio Decidendi: 1. Section 31(e) of the SARFAESI Act is not applicable to the facts of the present case. It is not every lease which will make the provisions of the Act inapplicable. It is only a lease in which no security interest has been created which alone makes the provisions of the Act inapplicable. 2. The SARFAESI Act has got overriding effect over the TN Rent Control Act in view of the provisions of Section 35 and therefore the rights said to have been accrued in favour of the tenant under the TN Rent Control Act cannot be enforced as against the bank while the bank invokes the provisions of the SARFAESI Act. 3. The application filed by the tenant before the Debts Recovery Tribunal is not barred under Section 69(2) of the Partnership Act and is maintainable.
Final Decision: W.P.No.27432 of 2010 filed by the tenant is allowed. The finding of the Debts Recovery Appellate Tribunal that the bank would be entitled to take possession of the premises from the tenant even when the lease deed was not registered under Section 107 of the Transfer of Property Act is set aside. In all other respects, the findings of the Debts Recovery Appellate Tribunal stand confirmed including the direction to restore possession of the premises viz., the entire ground floor and Shop Nos.B3 & B4 in the basement at Nos.71 and 72, Wallajah Road, Chennai to the tenant. In view of the above, W.P.No.23850 of 2010 filed by the bank is dismissed.
D. MURUGESAN, J.
1. Both the writ petitions relate to the order passed by the Debts Recovery Appellate Tribunal, Chennai dated 30.9.2010 made in R.A.(S.A.) No.61 of 2010. Writ Petition No.23850 of 2010 is filed by the Indian Bank, Adyar Branch (hereinafter called as "the bank") and Writ Petition No.27432 of 2010 is filed by M/s Nippon Enterprises South, Chennai (hereinafter called as "the tenant).
2. For disposal of both the writ petitions, we refer to the following facts as culled out from the respective affidavits filed in support of the writ petitions. M/s Elke Enterprises had availed certain financial facilities from the bank amounting to a sum of Rs.6,50,00,000/- under open cash credit facility and packing credit facility under the sanction ticket dated 16.10.2007. Those financial facilities were duly secured by creating equitable mortgage over the immovable properties belonging to one Mr.Shyam Narain and Mr.Bharat Shyam Narain situate at Laxmi Narain Towers at Door Nos.71 & 72, Wallajah Road, Triplicane, Chennai. Both the said Shyam Narain and Bharat Shyam Narain stood also as personal guarantors for the financial facilities and created an equitable mortgage by way of deposit of original title deeds with the bank on 10.1.2008. M/s Nippon Enterprises South claims to be the tenant in occupation of the entire ground floor and Shop Nos.B3 & B4 in the basement of the said property. Petitioners in M.P.No.2 of 2010 in W.P.No.23850 of 2010 are the employees of the tenant.
3. M/s Elke Enterprises committed default in repayment of the financial facilities and therefore the bank invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter called as "the SARFAESI Act") and the asset of M/s Elke Enterprises was classified as Non Performing Asset and the bank issued notice dated 15.7.2008 under Section 13(2) of the SARFAESI Act. In spite of the said notice and within the period of sixty days, M/s
Elke Enterprises did not clear the dues, which resulted in the bank issuing a notice dated 17.9.2008 under Section 13(4) for taking possession. A similar notice under Section 13(4)(d) was also issued to the tenant in respect of the portions of the property under their occupation. The said notice was also duly published in the newspapers.
4. On taking symbolic possession, the bank issued the sale notice dated 4.10.2008 fixing the auction date as 12.11.2008. Questioning the sale notice as well as the possession notice, M/s Elke Enterprises preferred appeal before the Debts Recovery Tribunal-II, Chennai in S.A.No.113 of 2008. The said appeal was dismissed by the Tribunal in its order dated 29.7.2009. This order was not questioned and therefore it became final.
5. As the bank could not take physical possession, it filed an application under Section 14 of the SARFAESI Act before the learned Chief Metropolitan Magistrate, Egmore, in which the tenant was arrayed as the third respondent. The learned Chief Metropolitan Magistrate passed the following order dated 1.6.2009 and the relevant portions read as under:-
".........
2. Whereas, after considering the entire materials, this Court is of opinion that u/s 14(1) of the Act, the petitioner is entitled to take possession/management of the schedule mentioned secured asset for sale.
3. Whereas, this Court intends to appoint an Advocate Commissioner to take possession of the schedule mentioned secured asset so as to enable the petitioner to sell the property to realise the outstanding dues.
4. You, Tr.Ramakrishnan, Advocate, Egmore Bar Association, Chennai is appointed as Advocate Commissioner to take possession and management of the schedule mentioned asset with the assistance of the Station House Officer of D1 Triplicane P.S., Chennai after taking inventory of the articles found in the premises and removing the inmates and handover the secured asset to the petitioner so as to proceed to recover the amount due to th
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