Validity of unregistered lease agreements and the availability of alternative remedies under the SARFAESI Act

JUDGMENT :

1. Assailing the notice dated 5.11.2020 issued by respondent No. 1-Bank to the petitioner to hand over possession of the schedule property on or before 19.11.2020, the petitioner filed the present writ petition to declare the same as illegal and to set aside the same.

2. Heard Mr. Muddu Vijay, learned Counsel for the petitioner and Mr. M.V.K. Viswanadham, learned Counsel appearing on behalf of respondent No. 1-Bank.

3. The case of the petitioner is that she is a tenant of property bearing H. No. 5-664/1 (Old) and H. No. 1-5-660/2 (New) on plot No. 6, admeasuring 191.75 square yards, situated at Kummarabasthi, Alwal, Malkajigir, Ranga Reddy District, and Mr. S. Seetharama Rao S/o. Sesharao is the owner of the said property. The said owner has executed lease agreement on 28.3.2016 in her favour for a period of five (05) years which expires on 27.3.2021. The monthly rent is Rs. 6,000/-. She has also deposited an amount of Rs. 50,000/- towards advance and the same shall be refundable. The owner has also executed a document on 11.7.2016 agreeing to sell the subject property to her for a sum of Rs. 40,00,000/- (Rupees forty lakh only). The petitioner has been paying the monthly rent regularly.

4. The petitioner's further case is that she received the impugned notice vide Ref. 13085/Tenant Notice/2020-2021/001, dated 5.11.2020 on 8.11.2020 under Section 13(4)(d) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for short 'SARFAESI Act, 2002) read with Rule 4(5)(1)(iii) of the Security Interest (Enforcement) Rules, 2002. Respondent No. 1-Bank has also pasted the possession notice, dated 'nil' to the door of subject property, and as per the same, it has taken the possession on 2.1.2020, whereas, as per the impugned notice, respondent No. 1 is asking the petitioner to hand over the property on or before 19.11.2020. Through the impugned notice, the petitioner came to know that the original owner has sold the subject property in favour of M/s. Om Sri Baireeswara Polymers and Fittings, respondent No. 2 herein. She does not know about the loan transaction between respondent Nos. 1 and 2. Since the petitioner is in possession and enjoyment of the subject property, respondent No. 1-Bank cannot issue the impugned notice. Prior to the impugned notice, she did not receive any other notice. Thus, the impugned notice is against the provisions of SARFAESI Act and the Rules framed there-under and, therefore, declare the impugned notice as illegal.

5. Respondent No. 1-Bank filed its counter denying the contentions of the petitioner. According to it, respondent No. 2 had availed credit facilities to the tune of Rs. 100.00 lakh of SOD facility (working capital) and Rs. 300.00 lakh of term loan facility vide sanction letter dated 5.12.2016. As a security for the said facilities, respondent No. 2 had created an equitable mortgage by way of Memorandum of Deposit of Original Title Deeds dated 21.9.2016 and 12.6.2015 in favour of respondent No. 1 on 22.12.2016 vide document No. 129 of 2016.

6. According to respondent No. 1-Bank, it has filed O.A. No. 875 of 2019 before the Debts Recovery Tribunal (DRT), Hyderabad for recovery of dues and respondent No. 2 did not appear before the DRT despite receipt of summons and the said case is pending. Respondent No. 2 has also filed S.A. No. 03/2020 before the DRT challenging the possession notice and obtained ex parte interim order on 6.1.2020 subject to certain conditions. Respondent No. 2 did not comply with such conditions. It appears that respondent No. 2 in collusion with the petitioner herein are preventing the Bank from realization of lawful dues. Respondent No. 2 herein is due and liable to pay a sum of Rs. 2,95,08,749.30 as on 23.12.2019 with future interest.

7. According to the Bank, the stamp paper on which the lease agreement said to have executed by the owner in favour of the petitioner was purchased by the husband of the petitioner and it i