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MADRAS HIGH COURT
S.S. Sundar and S. Srimathy, JJ.
A. Mohamed Bowmi and Ors. – Petitioners
versus
Chief Judicial Magistrate and Ors. – Respondents
W.P. (MD) Nos.16622 to 16634 of 2022 and W.M.P. (MD) Nos.12036, 12039, 12037, 12038, 12042, 12044, 12040, 12041, 12045, 12047, 12061, 12063, 12052, 12055, 12056, 12057, 12043, 12046, 12053, 12054, 12062, 12064, 12049, 12050, 12058 and 12059 of 2022
Decided on 1.8.2022
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Sections 14 and 17(4)(A) – Constitution of India – Article 19(1)(g) – Possession of secured asset – Protection of tenant – Lease is a transfer of right in immovable property – A lessee is entitled to protect his right under Transfer of Property Act and Rent Control Legislation even against a mortgagee whose right is subject to transfer of interest in favour of tenant – Tenancy is not terminated – It is not the case of respondent bank that tenancy was created to defeat right of bank contrary to term of mortgage – Bank who is aware of tenants’ possession should also disclose fact that property is in physical possession of tenants in application filed under Section 14 of Act – Possession was taken from petitioners without notice to them as a result of an unethical and unfair attitude of respondent bank – Tenants who are entitled to have protection of Rent Control Act, are deprived of their valuable right – Their Fundamental right to carry on business is also affected – Petitioners should be adequately compensated not only for physical dispossession but also damages caused to reputation and other mental turmoil petitioners had undergone – Apart from handing over physical possession of premises to respective petitioners, bank directed to pay sum of Rs.10,000/- each to petitioners as compensation. (Paras 17, 19, 20 and 24)
Result: Writ Petitions allowed.
ORDER (COMMON)
S.S. Sundar, J.—These writ petitions are filed to quash the order, dated 04.07.2022, passed by the Chief Judicial Magistrate, Dindigul in Cr.M.P.No.6484 of 2022 in the application filed by the second respondent bank under Section 14 of the SARFAESI Act.
2. The petitioners in all these writ petitions claimed that they are tenants under the fourth respondent mortgagor in respect of small portions of the commercial building in Plot No.1/49 of Kasimali Nagar, Vathalagundu Road, Dindigul Town.
3. It is not in dispute that the fourth respondent in the writ petitions is the absolute owner of the entire commercial building consisting of several shops which were taken on lease by the petitioners. The fact that the petitioners in these writ petitions have taken the building on lease long back is not disputed. It is admitted that the commercial building was the subject matter of mortgage created by the fourth respondent in favour of the second respondent on 11.02.2021.
4. It is the specific case of the petitioners in these writ petitions that the petitioners were inducted as tenants long before the mortgage. The second respondent bank initiated proceedings against the fourth respondent and the borrowers. It is stated in the petition filed by the bank before the Chief Judicial Magistrate that the equitable mortgage was created in the year 2021 and the Authorised Officer had issued a demand notice on 12.01.2022 under Section 13(2) of the SARFAESI Act. The fact that several tenants are in physical possession of their respective shops was not disclosed in the petition filed under Section 14 of the SARFAESI Act.
5. It is stated in the application that the borrowers and the mortgagor have failed to comply with the payment and that therefore, the application is filed under Section 14 of the SARFAESI Act. Notice to the respondents in the application in Crl.M.P.No.6484 of 2022 was dispensed with by the Chief Judicial Magistrate. It is revealed that the respondent bank has not even intimated the fact that the shops in the building were leased out to several tenants and that the tenants were in physical possession of the property. Since the bank has not disclosed the crucial fact that the physical possession was with several tenants who were doing business in their respective tenanted premises, the Chief Judicial Magistrate passed the following order:—
“5. Thus, the Inspector of Police, Dindigul Town South Police Station, is required to render all necessary assistance to the petitioner (secured creditor) in taking over possession of the secured assets as described in the petition mentioned schedule of properties.
6. In the result, Tr.B.Gnanavinothan, Enrolment No.MS 1015/2010 Dindigul is appointed as an Advocate Commissioner for taking possession by break open the buildings of the secured assets as mentioned in the schedule property of the petition and to handover the same to the secured creditor / petitioner with assistance of the concerned V.A.O. and S.I. of Police, Dindigul Town South Police Station. The remuneration of the Advocate Commissioner is fixed at Rs.6,000/- and shall be paid directly to the Advocate Commissioner by the petitioner/secured creditor within a week from today. Report by 04.08.2022.”
6. It is now admitted that physical possession was also taken by the respondent bank through the Advocate Commissioner appointed by the Chief Judicial Magistrate on 21.07.2022. Hence, the above writ petitions have been filed by the tenants mainly on the ground that the impugned order without notice to the petitioners is illegal, violative of principles of natural justice and without following the mandatory procedure both under the Statutes and the Rules framed thereunder as interpreted by Courts. It is their contention that their possession is protected by the Rent Control Legislation. While admitting the bank’s right to take symbolic possession, it is contended that the respondent bank should compensate them adequately for thr
A lessee is entitled to protect his right under Transfer of Property Act and Rent Control Legislation even against a mortgagee whose right is subject to transfer of interest in favour of tenant.
The SARFAESI Act's provisions on eviction take precedence over tenant protections under Rent Control Law when no valid tenancy exists.
The Debts Recovery Tribunal has no jurisdiction to pass an order of eviction against a bona fide tenant in respect of a mortgaged property.
Tenancy rights created after a mortgage are invalid if they violate statutory provisions, and tenants cannot claim protection under the Rent Control Act in such cases.
Tenants must establish valid, registered tenancy agreements to protect their possession against secured creditors under the SARFAESI Act.
Point of Law : Creditor has right to take actual possession of the secured asset even after transfer of title to an auction purchaser.
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