Can a Lessee Redeem Mortgaged Property in SARFAESI Proceedings Under Section 91 TPA?
In the complex world of secured lending in India, the () empowers banks and financial institutions to recover dues from defaulting borrowers by taking possession and selling mortgaged properties. But what happens when a lessee (tenant) occupies the property? A common question arises: In proceedings under the , can a lessee redeem the mortgaged property under (TPA)?
This blog post delves into this issue, drawing from judicial precedents and legal principles. Note: This is general information based on case law and not specific legal advice. Consult a qualified lawyer for your situation.
Understanding Key Concepts
Proceedings
The allows to enforce security interests without court intervention after issuing a notice under Section 13(2). If the borrower fails to repay, the creditor can take possession (Section 13(4)), seek assistance from the (Section 14), and auction the property.
Lessees often challenge these actions, claiming tenancy rights. However, courts prioritize ' rights, provided the mortgage is validly created and registered. [](https://supremetoday.ai/doc/judgement/00300054144)
Section 91 of the Transfer of Property Act
Section 91 TPA outlines who may redeem a mortgage:- The - Any person with an interest prior to or subordinate to the mortgage- Sureties and co-mortgagors
A lessee's interest is typically created after the mortgage (unless it's a leasehold mortgage). Thus, lessees generally lack statutory rights under Section 91, as their claim is not akin to a 's . 2024 0 Supreme(All) 2122
Lessee Rights in SARFAESI Proceedings: Limited Protection
Courts have consistently held that tenancy rights do not override ' rights under SARFAESI. For instance:- Registered Tenancy Essential: If a tenant intends to claim the possession of a secured asset when proceedings have been initiated under it must necessarily be done by way of a executed in his favour. Oral leases offer no protection. The court dismissed claims by petitioners failing to prove registered tenancy under TPA or state rent laws. 2024 0 Supreme(All) 2122
- Subordinate to Secured Interests: Even valid tenants cannot halt SARFAESI actions. In another case, the right to was extinguished upon execution of a registered sale deed post-auction, with the bank's actions in conformity with SARFAESI. [](https://supremetoday.ai/doc/judgement/00300054144)
Lessees may seek remedies under Section 17 (approach ), but under TPA Section 91 is unavailable as they are not 'borrowers' or mortgagors. 2025 0 Supreme(Bom) 790 Mortgagors are deemed 'borrowers' under SARFAESI, but lessees are third parties with derivative rights.
Role of Mortgage Registration in Lessee Claims
A valid, registered mortgage is foundational for SARFAESI enforcement, indirectly affecting lessees.
Authority of
The cannot adjudicate registration issues under Section 14. In one ruling, the court quashed the DM's order directing registration of an , stating it was outside purview, and remanded for fresh police assistance application. 2022 0 Supreme(Guj) 1831
Mandatory Registration
The registration of the deed is mandatory. In a case where the was not duly registered, the court highlighted that the based on such an unregistered deed was invalid. Non-registration bars enforcement. 2021 0 Supreme(Mad) 361 2022 0 Supreme(Bom) 1107
Implications for Lessees
If the mortgage is unregistered, the secured creditor's claim weakens, potentially allowing lessees to challenge possession. However, precedents affirm: without proper registration of the mortgage deed, the secured creditor cannot enforce their rights under the . 2022 0 Supreme(Bom) 1107 Lessees benefit indirectly but cannot independently redeem. 2011 0 Supreme(Mad) 4769
Priority of Over Other Claims
SARFAESI prioritizes secured debts:- Over Attachments: ' rights under the take precedence over subsequent attachment orders, allowing for the registration of sale certificates. Mortgages predating attachments prevail. 2024 0 Supreme(AP) 375- Bar: Jurisdiction lies with DRT, not civil courts, for security interest disputes. [](https://supremetoday.ai/doc/judgement/00300054144) (desc)- Vs. Other Laws: SARFAESI overrides attachments for prior mortgages.
Saraswat Co-operative Bank Ltd. VS Purnanadu Shekharmal Jain, deceased Through LRs. - Anupama P. Jain
Tenants or lessees cannot invoke CPC attachments to block sales. 2021 0 Supreme(Del) 721
Rights Extinguished Post-Sale
Once auctioned and issued, rights end. The right to stands extinguished on the execution of the registered sale deed. Lessees lose possession rights thereafter. [](https://supremetoday.ai/doc/judgement/00300054144)
Practical Recommendations
- For Lessees/Tenants:
- Ensure lease is registered to claim possession.
- Approach DRT under Section 17 promptly.
under Section 91 TPA is typically unavailable.
For Lenders:
- Register equitable mortgages mandatorily ( under Section 26E).
Saraswat Co-operative Bank Ltd. VS Purnanadu Shekharmal Jain, deceased Through LRs. - Anupama P. Jain
Verify title deeds to avoid fraud claims. 2024 0 Supreme(Jhk) 395
Seek Remedies: Borrowers/mortgagors must deposit 50% under Section 18 for appeals. 2025 0 Supreme(Bom) 790
Conclusion and Key Takeaways
Generally, a lessee cannot redeem mortgaged property under Section 91 TPA during SARFAESI proceedings, as their rights are subordinate and do not qualify for . Courts emphasize registered tenancies for possession claims, but prevail if the mortgage is properly registered. Non-registration can invalidate actions, but lessees must exhaust DRT remedies.
Key Takeaways:- Lessee rights require registered instruments. 2024 0 Supreme(All) 2122- ' priority under Section 26E. 2024 0 Supreme(AP) 375- No DM role in registration disputes. 2022 0 Supreme(Guj) 1831- Exhaust statutory remedies before writs. 2023 0 Supreme(P&H) 3308
Stay informed on evolving case law. For personalized guidance, consult legal experts.
#SARFAESIAct, #LesseeRights, #TPARedemption
![K.T. Govinde Gowda, S/o. Late Thimme Gowda vs Industrial Development Bank Of India [I.D.B.I.], Represented By Its DGM-ICG - 2025 Supreme(Online)(Kar) 22332](https://supremetoday-s3.b-cdn.net/Karnataka_2.png)
