The duration and registration requirements of leases under the Transfer of Property Act impact enforceability against a mortgagee but do not extinguish tenant rights under applicable tenancy laws.

J U D G M E N T

The creditor Bank, who proceeded against the property under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 is before this Court, challenging the order of the learned Chief Judicial Magistrate, Thrissur, at Ext.P8, which refused to allow the petitioner to take possession of the property, for reason of the 1st respondent being in occupation as a valid lessee. The learned Counsel for the petitioner and the respondents have relied on the decision in Vishal N. Kalsaria v. Bank of India and others [2016 (3) SCC 762], which clarifies the earlier decision of the Hon'ble Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. [(2014)6 SCC 1].

2. The issue is in a short compass as to whether the lease granted after the mortgage was valid or not. The mortgage of the property was made by deposit of title deed on 11.05.2010 confirmed by a letter dated 12.05.2010. The 1st respondent claims tenancy by virtue of Annexure A produced along with Ext.P4 application before the CJM. The tenant claimed before the CJM that since she had been validly put in occupation of the premises, by the owner of the premises by a lease deed at Annexure A, there could be no termination of her rights to continue occupation of the building by virtue of the proceedings under the SARFAESI Act.

3. The Bank contented that the lease was unregistered and hence not valid, for reason of the term being beyond one year, which transfer of property by way of lease had to be compulsorily registered. The CJM rejected the contention of the Bank relying on Vishal N. Kalsaria (supra) to find that even if the deed is un-registered, the Hon'ble Supreme Court has found that the provisions of the SARFAESI Act will not over ride the provisions of the Rent Control Act. The un-registered deed could be relied on for collateral purposes and the person who has been put in occupation would be a tenant holding over. The declaration in the decision of the Hon'ble Supreme Court was to the effect that if there is existing, rights and liabilities, in the nature of land lord and tenant and if regular rent is being paid, then the fact of non-registration of the document would be irrelevant.

4. The learned Counsel for the respondent Bank however, submits that even going by Vishal N. Kalsaria there could be no relief granted to the respondent herein. He also relies on the judgment of a learned Single Judge of this Court in Kelukutty P.M and Others v. Young Men's Christian Association and Others [2016 (1) KHC 493] as confirmed by the Division Bench in Kelukutty P.M and Others v. Young Men's Christian Association and Others [2016 (1) KHC 853].

It is to be noted that the decision of the learned Single Judge was passed simultaneous to Vishal N. Kalsaria, but the Division Bench noticed Vishal N. Kalsaria and confirmed the decision of the learned Single Judge.

5. The facts in the aforesaid decision were that the tenant was inducted into the building, which was constructed by the owner of the building after availing a financial facility from the Bank. The agreement executed between the Bank and the borrower also permitted lease of the properties and the remittance of the advance amounts received on such lease being executed. Despite that the Division Bench found that Vishal N. Kalsaria would not be applicable insofar as the agreement not being a mortgage deed and there being no contrary intention specified as provided under Section 65A(3) of the Transfer of Property Act, 1882 (for brevity 'the Act of

1882).

6. Section 65A of the Act of 1882 is extracted hereunder:-

65A. Mortgagor's power to lease:-

(1) Subject to the provisions of sub-section(2), a mortgagor, while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee.

(2) (a) Every such lease shall be such as would be made in the ordinary course of management of the propert