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2025 Supreme(Online)(DRAT) 47
DEBT RECOVERY APPELLATE TRIBUNAL
Mr. Justice Ashok Menon, CJ
SANKET PRAKASH SHIKARE – Appellant
Versus
PUNJAB AND SIND BANK – Respondent
1959/2024
Mr Radhe Agrawal, Advocate for Appellant. Mr Srihari Saranathan, Advocate for Respondent Bank.
A tenant's rights under a tenancy agreement created before a mortgage are protected under the SARFAESI Act, and the DRT must consider these rights when adjudicating possession claims.
Headnote:(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 17(4-A) - Transfer of Property Act, 1882 - Section 65A - Tenant's rights - Appellant, claiming tenancy, challenges DRT's dismissal of his application for protection of possession over mortgaged property - Court finds prima facie case for tenancy rights under SARFAESI Act, quashing DRT's order. (Paras 1, 5, 16)
(B) Tenancy Rights - The court emphasizes that a tenancy created prior to the mortgage does not violate the SARFAESI Act, and the DRT failed to consider the implications of Section 65A of the TP Act. (Paras 10, 14)
Facts of the case:
The appellant, a tenant, claims rights over a property mortgaged by the borrowers to a bank. The bank initiated SARFAESI proceedings due to default in repayment. The appellant's tenancy agreement was registered after the mortgage but before the demand notice was issued.
Findings of Court:
The court found that the appellant has a prima facie case for tenancy rights under Section 17(4-A) of the SARFAESI Act, and the DRT's dismissal was not sustainable.
Issues: The main issue was whether the appellant is entitled to protection under Section 17(4-A) of the SARFAESI Act despite the mortgage.
Ratio Decidendi: The court ruled that the tenancy agreement does not violate the SARFAESI Act as it was created before the demand notice, and the DRT did not adequately assess the tenancy rights under Section 65A of the TP Act.
Result: Appeal allowed; DRT's order quashed.
-: Order dated: 31/01/2025:-
The appellant who claims to be a tenant in occupation of the subject property, a residential building located on the western part of Plot No. 243, admeasuring 97.13 square meters, Sheet No. 140, CS No. 520, Circle No. 14/20, Mouza-Nagpur, Bajirao Galli, Devghare Mohalla, Nagpur challenges the order dated 30.08.2024, dismissing I.A. No. 1543 of 2024 in Securitisation Application (S.A.) No. 367 of 2023, by the Debts Recovery Tribunal, Nagpur(DRT) declining to protect his possession over the secured asset under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short). Aggrieved, the appellant is in appeal. He also I.A. No.659 of 2024 seeks to stay effect and operation of the impugned order.
2. The facts and brief, are thus:
The appellant states that he is neither a borrower, a mortgagor nor a guarantor. The subject property belongs to respondent Nos. 2 to 5.
They availed various credit facilities from respondent No. 1. The borrowers defaulted in repayment and the banks initiated Sarfaesi action under the provisions of the SARFAESI Act for recovery of their debt. A demand notice was issued on 29.05.2023 under Sec. 13(2) of the SARFAESI Act calling upon the appellants to pay ₹1,40,643.96 together with interest. The borrowers did not take any initiative to pay off the debt, and hence, the respondent bank took symbolic possession of the subject property under Sec. 13(4) of the SARFAESI Act on 30.08.2023. Apprehending the taking over of physical possession, the appellant, as an aggrieved person, filed the S.A. under Sec. 17 of the SARFAESI Act.
3. The appellant contends that a tenancy agreement was registered in his favour as document No. 5590/2023 with the Joint Sub- Registrar, Nagpur-1, on 01.05.2023, granting a lease at a monthly rent of ₹10,000/-for 35 months with effect from 01.05.2023. The term of the lease expires only on 30.04.2026. The borrowers informed the appellant that the subject property was mortgaged with a bank as security and that they would repay the debt. The bank has obtained an order from the C.J.S.D & A.C.J.M for taking physical possession of the subject property under Sec. 14 of the SARFAESI Act on 11.03.2024.
4. Anticipating dispossession, the appellant filed the S.A. and also filed I.A. No. 1543 of 2024 in the S.A. seeking a stay to the act of taking possession. The DRT declined to grant the interim relief, observing that the provisions of Sec. 17(4-A) of the SARFAESI Act was not applicable.
5. The only question which arises for consideration in this appeal is whether the appellant is prima facie entitled to protection u/s 17(4- A) of the SARFAESI Act.
7. Section 17(4-A) reads thus, “Where—
(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy-
(a) has expired or stood determined; or (b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or (c) is contrary to terms of mortgage; or (d) is created after the issuance of notice of default and demand by the Bank under subsection (2) of section 13 of the Act; and (ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.”
8. The borrowers had admittedly created the mortgage before the tenancy agreement dated 01.05.2023, and the demand notice under Sec.13(2) was
