The judgment clarified that tenants must have registered leases to claim long-term rights, and banks must comply with legal processes when facing tenant resistance under the SARFAESI Act.

JUDGMENT

The petitioner is a tenant of the building over which security interest was created by the borrower in favour of the respondent Bank, at the time of availing a loan. The borrower turned to be a defaulter, when the Bank proceeded with steps under the SARFAESI Act . The petitioner immediately approached the DRT, Ernakulam by filing S.A. No. 402 of 2013 contending that, he is in occupation of the premises as a tenant and that the respondent Bank is not justified in proceeding with steps without giving him an opportunity to put forth his version. It is also stated that, the DRT, Ernakulam had originally granted a stay, but subsequently, it came to be vacated. This made the petitioner to approach this Court by filing the writ petition.

2. Heard the learned counsel for the petitioner as well as Sri. A. Antony, the learned counsel for the respondent Bank. 3. According to the petitioner, he is a tenant of the building bearing door No.1/31(old) of Trissur Corporation, where 2nd and 3rd respondents were residing earlier. The building belongs to the 2nd respondent lessor which stands mortgaged to 1st respondent for a housing loan and a business loan availed in the year 2010. It is stated that the tenancy was created in the year 2009 for a period of eleven months, which was being continued. Later, a fresh rent deed was executed on 01.11.2011 as borne by Ext.P1 agreeing to pay the rent as specified therein. In view of the coercive steps taken by the Bank against the 2nd respondent/lessor, the petitioner approached the DRT, Ernakulam by filing S.A. No. 402/2013 and an interim order of stay was obtained. Subsequently, it came to be vacated holding that the DRT was having no jurisdiction to deal with the case filed by a tenant in view of the ruling rendered by the Apex Court in Harshad Govardhan Sondagar v. International assets Reconstruction Company Limited and Others (2014) 6 SCC 1 and hence the writ petition.

4. The learned counsel for the petitioner points out that, the legal position stands declared by the Apex Court, as to the course of action to be pursued by secured creditors in cases involving tenancy, as per the judgment reported inHarshad Govardhan Sondagar v. International assets Reconstruction Company Limited and Others (2014) 6 SCC 1 . It has been categorically stated that, Banks cannot take the law into their hands and forcefully evict a tenant, merely with reference to the provisions of the SARFAESI Act . The Apex Court observed that, the non obstante clause under Section 17 of the Act will come into operation, only when any other provision of law stands inconsistent to the provisions of the SARFAESI Act . After elaborate discussion, the Apex Court also held that the right of a lessee to continue to occupy the premises, even after creation of a mortgage, is not otherwise dealt with by the SARFAESI proceedings and hence, two types of leases will stand recognized, to have the benefit to the extent as specified therein. The first one, in respect of leases created prior to the mortgage, and the second one, in respect of leases created after mortgage.

5. Section 13(13) of the Act stipulates that, after service of notice under Section 13(2), no borrower is supposed to effect any conveyance/alienation with regard to the property concerned. The learned counsel points out that, the course of action open to the Bank i.e, secured creditor, is to affix a notice in the premises under Rule 8(1) of the relevant Rules; upon which it will be open for the tenant either to vacate the premises or to resist the eviction by producing necessary materials to justify the continued occupation. If the eviction is resisted, the next course of action for the Bank is to file an application before the concerned CJM Court under Section 14 of the SARFAESI Act , along with an affidavit, also giving particulars of the tenant and then, it will be for the CJM/competent authority to consider the matter after issuance of notice to the tenant and to proceed