Summary
The High Court should not have entertained an Article 227 petition by a person claiming tenancy of a secured asset when an appeal lay under Section 18 of the SARFAESI Act; Harshad Govardhan Sondagar's observations about the absence of a remedy for tenants belong to the pre-2016 regime. On merits, the claimant produced no rent, tax or electricity receipts showing occupation before the Section 13(2) demand notice and had stayed silent through symbolic and physical possession, so a mandatory order restoring possession was unjustified.
Issues
- Whether the High Court could entertain an Article 227 petition against a DRT order refusing interim relief to an alleged tenant, despite the appellate remedy under Section 18 of the SARFAESI Act.
- Whether the alleged tenant had established a pre-existing tenancy of the secured asset sufficient to justify a mandatory order restoring possession taken under Section 13(4) read with Section 14 of the SARFAESI Act.
- Whether the ratio of Bajarang Shyamsunder Agarwal on tenancies under rent laws vis-a-vis the SARFAESI Act runs counter to the Constitution Bench in V. Dhanapal Chettiar (left open).
Provisions considered
- Section 17(4A), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Inserted with effect from 01.09.2016, it enables a person claiming to be a lessee or tenant of a secured asset to approach the DRT against measures under Section 13(4), with power in the Tribunal to declare the measures invalid and restore possession. (¶ 12)
- Section 18, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002A DRT order on such an application is appealable to the Appellate Tribunal; given this statutory remedy, interference by the High Court under Articles 226/227 has repeatedly been deprecated and ought not to have occurred here. (¶¶ 11, 12, 13)
- Sections 13(2), 13(4) and 14, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002The demand notice, symbolic possession with publication under Rule 8 of the Security Interest (Enforcement) Rules, 2002, and physical possession through the District Magistrate were the measures the claimant sought to undo; his failure to produce evidence of occupation before the Section 13(2) notice and his indifference after publication of the possession notices were decisive. (¶¶ 4, 5, 7, 23, 24, 25)
- Sections 13(13) and 35, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002The Court summarised Harshad Govardhan Sondagar (Section 13(13) overrides Section 65A of the Transfer of Property Act for leases created after a Section 13(2) notice but does not determine a prior registered lease; an oral or unregistered tenancy cannot run beyond one year), Vishal N. Kalsaria (non obstante clause in Section 35 does not override rent laws) and Bajarang Shyamsunder Agarwal (that reading of Section 35 too narrow; tenant under oral/unregistered agreement must prove tenancy by receipts and becomes a tenant in sufferance a year after the notice). It did not decide the conflict argued by the respondent. (¶¶ 15, 16, 17, 18, 19, 22, 23)
- Sections 2(g) and 6, West Bengal Premises Tenancy Act, 1997The respondent relied on the extended definition of tenant and the restricted grounds of eviction to say his tenancy survived; the Court noted V. Dhanapal Chettiar and Anthony v. K.C. Ittoop on the continuance of the jural relationship under rent laws but did not rule on the point. (¶¶ 14, 20, 21, 23)
Held
- After the 2016 amendment introducing Section 17(4A), a person claiming to be a tenant of a secured asset has a statutory remedy before the DRT against measures under Section 13(4), and the DRT's order is appealable under Section 18; the High Court ought not to have entertained a petition under Article 227. The observations in Harshad Govardhan Sondagar about the absence of a statutory remedy for tenants relate to the pre-amendment law and do not apply after the amendment. (¶¶ 11, 12, 13)
- A claimant who asserts a tenancy from 1987 but produces no rent receipt, tax receipt or electricity bill evidencing occupation before the Section 13(2) demand notice, and relies only on rent deposited with the Rent Controller after that notice, does not establish a compelling case of pre-existing tenancy; a reference to a tenancy in the sale deed or a letter of attornment issued by the borrower-landlord, unsupported by independent possessory evidence, is insufficient, and an ejectment suit by the borrower may not be determinative since a sham and collusive suit cannot be ruled out. (¶ 23)
- A mandatory order restoring status quo ante requires a compelling, cast-iron case. A claimant who did nothing after the published and affixed notice of symbolic possession and the later notice of physical possession, and approached the DRT only after possession was taken, is not entitled to such an order. (¶¶ 24, 25)
- The Court did not decide whether Bajarang Shyamsunder Agarwal's view on the determination of rent-law tenancies by efflux of time conflicts with the Constitution Bench in V. Dhanapal Chettiar, since the respondent's evidence of tenancy was unconvincing. (¶¶ 19, 22, 23)
Result
Appeal allowed; High Court order set aside; status quo in respect of the secured asset directed till disposal of the securitisation application, which the DRT is to decide within two months of communication of the order without unnecessary adjournments.