[ad_1]
Kerala High Court
G.Subhulakshmi vs Uco Bank on 30 July, 2025
Author: Anil K.Narendran
Bench: Anil K.Narendran
1
W.A. No.1577 of 2025
2025:KER:56062
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN
&
THE HONOURABLE MR.JUSTICE MURALEE KRISHNA S.
WEDNESDAY, THE 30TH DAY OF JULY 2025 / 8TH SRAVANA, 1947
WA NO. 1577 OF 2025
AGAINST THE JUDGMENT DATED 25.06.2025 IN WP(C) NO.15236 OF
2025 OF HIGH COURT OF KERALA
APPELLANT/PETITIONER
G.SUBHULAKSHMI,AGED 47 YEARS
W/O DR. R MANIKKUMAR, RESIDING AT SREE RANGA, NANDANAM
HOUSE, ALAPPUZHA P.O., PIN - 688001
BY ADVS.
SHRI.K.B.ARUNKUMAR
SHRI.RANJIT BABU
SMT.POOJA K.S.
RESPONDENTS/RESPONDENTS:
1 UCO BANK,QUILON BRANCH, KHAISE BUILDING, BRANCH ROAD,
QUILON - REP. BY ITS CHIEF MANAGER/AUTHORIZED OFFICER,
PIN - 691001
2 ABDUL SALAM,
S/O. KOCHU KUNJU, R/A. KODIYIL HOUSE, MYNAGAPPALLY,
VENGA P.O., KOLLAM, PIN - 690521
SHRI.DEEPAK JOY. K.
THIS WRIT APPEAL WAS FINALLY HEARD ON 15.07.2025, THE COURT
ON 30.07.2025 PASSED THE FOLLOWING:
2
W.A. No.1577 of 2025
2025:KER:56062
"CR"
JUDGMENT
Muralee Krishna, J.
The petitioner in W.P.(C)No.15236 of 2025 filed this writ
appeal under Section 5(i) of the Kerala High Court Act 1958,
against the judgment dated 25.06.2025 passed by the learned
Single Judge, dismissing that writ petition filed by the
appellant/petitioner challenging Ext.P7 order dated 28.03.2025
of the Debts Recovery Appellate Tribunal, Chennai, which
confirmed Ext.P3 order dated 27.11.2024 in S.A. No.618 of 2024
of the Debts Recovery Tribunal-II, Ernakulam.
2. The appellant obtained the entire ground floor and two
shop rooms on the southern side of the upstairs portion of a two-
storey building bearing No. AMCW-33/803 situated in 10.09 Ares
of property in resurvey No.28 (old survey No.598/8/A/16, 8/A/18)
Block No.46 of Alappuzha West Village, from the 2nd respondent
for conducting a Scanning and Diagnostic Centre for a period of
seven years, i.e., from 01.05.2023 to 30.04.2030, with a
stipulation to pay a monthly rent of Rs.30,000/-, on the strength
of Ext.P1 registered rent agreement bearing No.1648 of 2023 of
3
W.A. No.1577 of 2025
2025:KER:56062
SRO Alappuzha dated 29.04.2023. While the appellant was
continuing as a tenant, she understood that the 1st respondent
Bank proceeded against the property, including the building, which
was offered as security by the 2nd respondent as a guarantor to
the loan availed by M/s. Arafa Gold and Diamonds Private Ltd.
from the 1st respondent Bank. Pursuant to the proceedings
initiated by the 1st respondent under Section 14 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (‘SARFAESI Act‘ for
short), the Chief Judicial Magistrate, Alappuzha, appointed an
Advocate Commissioner in M.C.No.327 of 2024. The Advocate
Commissioner intimated to the appellant to vacate the premises
and to hand over the physical possession of the secured asset to
the 1st respondent Bank. Challenging the securitisation measures
initiated by the 1st respondent Bank, the appellant filed S.A.
No.618 of 2024 before the Debts Recovery Tribunal, Ernakulam.
By Ext.P3 order dated 27.11.2024, the Debts Recovery Tribunal
dismissed the securitisation application filed by the appellant.
Though the appellant preferred an appeal before the Debts
4
W.A. No.1577 of 2025
2025:KER:56062
Recovery Appellate Tribunal, Chennai, as AIR (SA) No.1923 of
2024, by Ext.P7 order dated 28.03.2025, the appeal was
dismissed. Challenging Ext.P7, the appellant preferred the writ
petition under Article 226 of the Constitution of India seeking the
following reliefs;
“(i) To call for the entire records leading to the issuance of
Exhibit P7 Order proceedings of the Debt Recovery
Appellate Tribunal, Chennai in AIR (SA) No.1923/2024 and
to set aside the same, in the interest of justice.
(ii) To call for the entire records leading to the issuance of
Exhibit P7 and Exhibit P3 to declare as illegal and to
reconsider the matter on merits, in the interest of justice.
(iii) To declare that the entire securitisation proceedings
initiated by the first respondent as illegal, arbitrary and
against law and to keep in abeyance all the securitisation
proceedings, in the interest of justice.”
3. The 1st respondent Bank had filed a counter affidavit
dated 20.06.2025 opposing the reliefs sought in the writ petition
and producing therewith Exts.R1(A) to R1(E) documents. It is
contended in the counter affidavit filed by the 1st respondent that
the 2nd respondent stood as guarantor to the credit facilities
availed by the partnership firm M/s. Arafa Gold and Diamonds
Private Ltd., by a sanction letter dated 14.03.2014 and had
5
W.A. No.1577 of 2025
2025:KER:56062
created an equitable mortgage of the subject properties in favour
of the 1st respondent Bank. Subsequently, the very same borrower
was sanctioned another cash credit facility to the limit of Rs.17/-
Crores. The equitable mortgage already created by the 2nd
respondent was extended to the credit facilities sanctioned on
13.11.2019 in respect of the properties covered by the sale deed
No.1729 of 2005 dated 29.03.2025 of SRO Alappuzha, and the
release deed No.168 of 2009 dated 13.01.2009. Later, the
partnership firm was constituted as a company in the name of
M/s.Arafa Gold and Diamonds Private Ltd., with the 2nd respondent
as the Managing Director in the name of M/s.Arafa Gold and
Diamonds Private Ltd. The credit facilities to the limit of Rs.17/-
Crores already sanctioned were renewed by the sanction letter
dated 29.06.2022. It is further contended by the 1st respondent
that the lease was created in collusion between the appellant and
the 2nd respondent in order to defraud the 1st respondent Bank.
The lease is against the provisions in Section 65A of the
Transfer of property Act, 1882 (‘T.P Act‘ for short), read with
Section 17(4-A) of the SARFAESI Act. It is also stated in the
6
W.A. No.1577 of 2025
2025:KER:56062
counter affidavit of the 1st respondent that the loan account was
classified as a Non-Performing Asset (‘NPA’ for short) and notice
under Section 13(2) of the SARFAESI Act was issued to the 2 nd
respondent which ended up in the issuance of notice under Section
13(4) and filing of application before the Chief Judicial Magistrate,
Alappuzha, under Section 14 of that Act. The appellant, during the
pendency of her appeal before the Debts Recovery Appellate
Tribunal, Chennai, moved this Court by filing OP(DRT) No.398 of
2024 praying for disposal of the appeal and the stay petition
pending before the Debts Recovery Appellate Tribunal, Chennai,
within a time frame and for the further direction to the 1st
respondent Bank not to take any coercive steps to dispossess the
appellant from the premises till the disposal of the OP(DRT). Some
other persons who are similarly situated to that of the appellant
also filed OP(DRTs) before this Court. By Ext.R1(C) common
judgment dated 20.12.2024, this Court dismissed the OP(DRTs),
holding that the petitioners therein have not made out a prima
facie case for an interim protection. However, the learned Single
Judge directed the Debts Recovery Appellate Tribunal to consider
7
W.A. No.1577 of 2025
2025:KER:56062
the appeal untrammelled by the observations contained in that
judgment. In the writ petition, the appellant did not disclose the
filing of the OP(DRT) before this Court and the adverse
observations made in Ext.R1(C) judgment. The appellant did not
approach this Court with clean hands.
4. After hearing both sides and on appreciation of materials
on record, the learned Single Judge dismissed the writ petition as
said above.
5. Heard the learned counsel for the appellant and the
learned counsel for the 1st respondent. Considering the nature of
the dispute, issuance of notice to the 2nd respondent is dispensed
with.
6. The learned counsel for the appellant would argue that
the appellant, being a tenant in possession of the portion of the
building, based on a valid tenancy, cannot be dispossessed by
invoking Section 14 of the SARFAESI Act. It is further argued by
the learned counsel that the Kerala Buildings (Lease and Rent
Control) Act, 1965 (‘Rent Control Act‘ for short) has primacy over
the SARFAESI Act, and a tenant can be evicted only by proving
8
W.A. No.1577 of 2025
2025:KER:56062
the grounds provided under Section 11 of the said Act. The learned
counsel relied on the judgment of a learned Single Judge of this
Court in Shiju Mani v. CSB represented by its Authorised
Officer [2024 (2) KHC 68] in support of his arguments.
7. On the other hand, the learned counsel for the 1 st
respondent argued that the 2nd respondent mortgaged the
property to the Bank on 02.04.2014. After converting the loan into
NPA, the tenancy was created by the 2nd respondent by inducting
several tenants, including the appellant, in portions of the
building. The tenancy in favour of the appellant was created on
29.04.2023. The notice under Section 13(2) of the SARFAESI Act
was issued by the Bank to the 2nd respondent on 23.06.2023. By
inviting our attention to Section 17(4-A) of the SARFAESI Act and
Section 65A of the T.P Act, the learned counsel argued that the
tenancy created by the 2nd respondent after the mortgage is in
violation of Section 65A of the T.P Act, and hence, the appellant
cannot claim protection from eviction. The learned counsel further
argued that even the claim of tenancy raised by the appellant is a
matter that has to be raised before the Debts Recovery Tribunal
9
W.A. No.1577 of 2025
2025:KER:56062
under Section 17(4-A) of the SARFAESI Act and not in a writ
petition filed under Article 226 of the Constitution of India. By
pointing out the terms and conditions of the mortgage, the learned
counsel submitted that the 2nd respondent is prohibited from
creating any encumbrance over the property after the mortgage,
and for that reason also, the benefit of lease cannot be claimed by
the appellant. It is also argued by the learned counsel for the 1 st
respondent that the appellant filed O.P.(DRT)No.398 of 2024
before this Court, and that fact is suppressed in the writ petition.
The learned Single Judge specifically noted that aspect in the
impugned judgment. In support of his arguments, the learned
counsel for the 1st respondent relied on the judgments of the Apex
Court in Bajarang Shyamsunder Agarwal v. Central Bank of
India [(2019) 9 SCC 94], and that of this Court in Kelukutty
P.M and others v. Young Men‘s Christian Association and
another [2016 (1) KHC 853] which he relied before the learned
Single Judge also.
8. The points to be decided in this writ appeal are:
1) Whether the appellant who was inducted into
the secured asset after the mortgage and conversion
10W.A. No.1577 of 2025
2025:KER:56062of the loan as NPA, but before the issuance of notice
under Section 13(2) of the SARFAESI Act, can claim
the protection under the provisions of the Kerala
Buildings (Lease and Rent Control) Act, 1965, against
eviction?
2) Whether the impugned Judgment of the learned
Single Judge is erroneous or illegal, which warrants
any interference by exercising the appellate jurisdic-
tion under Section 5(i) of the Kerala High Court Act
1958?
9. We consider both these points together, since they are
interconnected. There are some admitted facts in the instant case.
The fact that the 2nd respondent mortgaged the property, including
the subject building to the 1st respondent Bank on 02.04.2014 is
admitted. It is also not in dispute that the lease was created in
favour of the appellant by virtue of Ext.P1 rent agreement dated
29.04.2023 for seven years, i.e, from 01.05.2023 to 30.04.2030.
The issuance of notice under Section 13(2) of the SARFAESI Act
on 23.06.2023 to the 2nd respondent by the Bank is also not in
dispute. When the Bank proceeded against the secured asset, the
appellant approached the Debts Recovery Tribunal, which ended
in dismissal by Ext.P3 order dated 27.11.2024. The appeal filed
11
W.A. No.1577 of 2025
2025:KER:56062
by her before the Debts Recovery Appellate Tribunal, Chennai, was
also dismissed by Ext.P7 order dated 28.03.2025.
10. The SARFAESI Act was enacted with an intention to
regulate Securitisation and Reconstruction of Financial Assets and
Enforcement of security Interest and to provide for a central
database of security interest created on property rights, and for
matters connected therewith or incidental thereto. It was enacted
in response to a scenario where slow-paced recovery and
staggering amounts of non-performing assets were looming over
the Banks. In order to overcome the practical reality and keep in
pace with the changing commercial world, the Narasimham
Committee I and II and Andhyarujina Committee were constituted
by the Central Government to provide solutions for the issues
plaguing the banking system of the country. In culmination of the
suggestions made by the aforesaid Committees, intended to
enable the Banks to resolve the issue of liquidity and aim for
reduction in the number of non-performing assets, the present Act
has been enacted. The Preamble of the Act as well as the scheme
of the Act give emphasis on efficient and expeditious recovery of
12
W.A. No.1577 of 2025
2025:KER:56062
bad debts.
11. Section 13 of the SARFAESI Act provides for the
enforcement of security interest. It provides a self-executing
mechanism for the Banks to recover the bad debts in an efficient
manner. Sub-section (2) of Section 13 of the SARFAESI Act
envisages a notice, which acts as the trigger point for initiation of
the recovery process under the SARFAESI Act. In the said notice,
the secured creditor is required to disclose information on the
amount payable by the borrower and the secured interest
intended to be enforced by the secured creditor in the event of
non-payment of secured debts. If the borrower fails to discharge
the liability, the secured creditor has four options, including taking
possession of the secured assets of the borrower as provided
under Section 13(4) of the SARFAESI Act.
12. Section 13(4) of the SARFAESI Act, which provides for
recourse to the secured creditor on the failure of the debtor in
discharging the loan, is extracted hereunder:
“(4) In case the borrower fails to discharge his liability in
full within the period specified in sub-section (2), the
secured creditor may take recourse to one or more of the
13W.A. No.1577 of 2025
2025:KER:56062following measures to recover his secured debt, namely:-
(a) take possession of the secured assets of the borrower
including the right to transfer by way of lease, assignment
or sale for realising the secured asset;
(b) take over the management of the business of the
borrower including the right to transfer by way of lease,
assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease,
assignment or sale shall be exercised only where the
substantial part of the business of the borrower is held as
security for the debt:
Provided further that where the management of whole of
the business or part of the business is severable, the
secured creditor shall take over the management of such
business of the borrower which is relatable to the security
for the debt.
(c) appoint any person (hereafter referred to as the
manager), to manage the secured assets the possession of
which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who
has acquired any of the secured assets from the borrower
and from whom any money is due or may become due to
the borrower, to pay the secured creditor, so much of the
money as is sufficient to pay the secured debt.”
13. Section 13(13), which is relevant for the instant case,
provides that no borrower shall, after receipt of notice referred to
in sub-section (2), transfer by way of sale, lease, or otherwise
14
W.A. No.1577 of 2025
2025:KER:56062
(other than in the ordinary course of his business) any of his
secured assets referred to in the notice, without prior written
consent of the secured creditor.
14. Section 14 of the SARFAESI Act provides for a
procedural mechanism for taking possession of property and
documents with respect to the secured assets from the borrower
by approaching the Chief Metropolitan Magistrate or District
Magistrate to assist the secured creditor in taking possession of
the secured asset.
15. Section 17 of the SARFAESI Act deals with the recourse
that can be taken by an aggrieved person against the measures
taken under Section 13(4) by the secured creditor.
16. Section 17(4-A) of the SARFAESI Act, which was inserted
by Act 44 of 2016, with effect from 01.09.2016, deals with the
claim of tenancy or leasehold right upon the secured asset, which
reads thus;
“17(4A). 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
15W.A. No.1577 of 2025
2025:KER:56062shall, 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; 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 sub-section (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.”
(Underline Supplied)
17. Section 35 of the SARFAESI Act provides that the
provisions of this Act shall have effect, notwithstanding anything
inconsistent therewith contained in any other law for the time
being in force or any instrument having effect by virtue of any
such law.
18. Section 65A of the T.P. Act reads thus:
“65A. Mortgagor’s power to lease.–(1)Subject to the
provisions of sub-section (2), a mortgagor, while lawfully in
16W.A. No.1577 of 2025
2025:KER:56062possession 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 property
concerned, and in accordance with any local law, custom or
usage,
(b)Every such lease shall reserve the best rent that can
reasonably be obtained, and no premium shall be paid or
promised and no rent shall be payable in advance,
(c)No such lease shall contain a covenant for renewal,
(d) Every such lease shall take effect from a date not later
than six months from the date on which it is made,
(e)In the case of a lease of buildings, whether leased with
or without the land on which they stand, the duration of the
lease shall in no case exceed three years, and the lease
shall contain a covenant for payment of the rent and a
condition of re-entry on the rent not being paid with a time
therein specified.
(3)The provisions of sub-section (1) apply only if and as far
as a contrary intention is not expressed in the mortgage-
deed; and the provisions of sub-section (2) may be varied
or extended by the mortgage-deed and, as so varied and
extended, shall, as far as may be, operate in like manner
and with all like incidents, effects and consequences, as if
such variations or extensions were contained in that sub-
section.” (Underline Supplied)
19. The right of the tenant who was inducted in a secured
17
W.A. No.1577 of 2025
2025:KER:56062
asset when a proceeding was initiated under the provisions of the
Act to recover the debt by taking possession of that secured asset
was examined by the Apex Court in Harshad Govardhan
Sondagar v. International Assets Reconstruction Company
Ltd. and others [(2014) 6 SCC 1]. In that judgment after
noticing the scheme of the SARFAESI Act, the Apex Court held
that if the lawful possession of the secured asset is not with the
borrower, but with a lessee under a valid lease, the secured
creditor cannot take possession of the secured asset until the
lawful possession of the lessee gets determined and the lease will
not get determined if the secured creditor chooses to take any of
the measures specified in Section 13 of the SARFAESI Act.
Accordingly, the Apex Court concluded that the Chief Metropolitan
Magistrate/District Magistrate can pass an order for delivery of
possession of secured asset in favour of the secured creditor only
when he finds that the lease has been determined in accordance
with Section 111 of the T.P Act.
20. In Harshad Govardhan [(2014) 6 SCC 1] the Apex
Court further held that if the Chief Metropolitan Magistrate/District
18
W.A. No.1577 of 2025
2025:KER:56062
Magistrate is satisfied that a valid lease is created before the
mortgage and the lease has not been determined in accordance
with Section 111 of the T.P Act, then he cannot pass on order for
delivery of possession of the secured asset to the secured creditor.
In case, he comes to the conclusion that there is no valid lease
either before the creation of the mortgage or after the creation of
the mortgage satisfying the requirement of Section 65A of the T.P.
Act, or even though there is a valid lease the same stands
determined in accordance with Section 111 of the T.P. Act, he can
pass an order for delivery of possession of the secured asset to
the secured creditor.
21. In Harshad Govardhan [(2014) 6 SCC 1], the Apex
Court considered the inconsistency between Section 13(13) of the
SARFAESI Act and Section 65A of the T.P Act and by noting that
while Section 13(13) of the SARFAESI Act prohibits a borrower
from leasing out any of the secured asset after receipt of a notice
under Section 13(2) without the prior written consent of the
secured creditor, Section 65A of the T.P Act enables the
borrower/mortgagor to lease out the property, the Apex Court held
19
W.A. No.1577 of 2025
2025:KER:56062
that the SARFAESI Act will override the provisions of the T.P. Act.
22. By noting Sub Sections (1) and (3) of Section 65A of
the T.P.Act, in Harshad Govardhan [(2014) 6 SCC 1] the Apex
Court held that so long as the mortgage-deed does not prohibit a
mortgagor from making a lease of the mortgaged property and so
long as the lease satisfies the requirements of sub-section (2) of
Section 65A, a lease made by a borrower as a mortgagor will not
only be valid but is also binding on the secured creditor as a
mortgagee. The implication of a registered and unregistered
instrument/oral agreement was also considered by the Apex Court
in that judgment.
23. In Kelukutty P.M [2016 (1) KHC 853], the question
that came up for consideration before the Division Bench of this
Court was whether protection from proceedings under Section 14
of the SARFAESI Act is available to a tenant in the case of a lease
created after mortgage with the consent of the Bank. After an
elaborate analysis of the relevant provisions and the judgments of
the Apex Court binding the field, the Division Bench held that the
consent of the Bank there to create a post mortgage lease is of no
20
W.A. No.1577 of 2025
2025:KER:56062
consequence in a case where lease deeds were executed not in
accordance with Section 65A(2) of the T.P. Act. In paragraph 23 of
the said judgment the Division Bench of this court held thus;
“Lease to be executed subsequent to the mortgage were to
be executed in accordance with Section 65A(2) and consent
cannot be read to execute lease contrary to the provisions
contained in Section 65A. Proceedings under Section 14
have been initiated for taking possession and in view of the
law laid down by the Apex Court in Harshad Govardhan
Sondagar‘s case (supra) if the lease executed after the
mortgage is not in accordance with Section 65A of the 1882
Act, the lessee can be dispossessed. Principle of estoppel
cannot be allowed to operate against the specific statutory
provisions. Had the leases executed in favour of the
appellants were in accordance with Section 65A, appellants
might be right in their submission that they could resist the
dispossession under Section 14. But we having found that
the leases were not executed in accordance with Section
65A, the principle of estoppel cannot be pressed in the facts
and circumstances of the case.” (underline supplied)
24. The judgment of the Apex Court in Harshad Govardhan
[(2014) 6 SCC 1] as well as the judgment of this Court in
Kelukutty P.M [2016 (1) KHC 853] were rendered prior to the
insertion of Section 17(4-A) in the SARFAESI Act.
21
W.A. No.1577 of 2025
2025:KER:56062
25. In Bajarang Shyamsunder Agarwal [(2019) 9 SCC
94], the secured asset, which is a residential flat in Andheri (West)
Mumbai, was mortgaged by the borrower/landlord with the bank
in equitable mortgage by depositing the title deeds with an
intention to secure the credit facility. When the borrower failed to
make the due repayment of the said credit facilities, the bank
classified the debt as NPA. The Bank then issued a notice under
Section 13(2) of the SARFAESI Act and thereafter made an
application before the Chief Metropolitan Magistrate, Esplanade,
Mumbai under Section 14 of the SARFAESI Act. The Chief
Metropolitan Magistrate directed the Assistant Registrar to take
possession of the secured asset, consequent to the application
filed by the Bank under Section 14. The appellant /tenant in that
case claimed that the landlord created the tenancy in his favour
prior to the creation of the mortgage in favour of the Bank.
Subsequent to the order of the Chief Metropolitan Magistrate, the
borrower issued a legal notice to the appellant directing him to
vacate the premises. The appellant/tenant therein preferred a suit
before the Court of Small Causes and obtained an interim
22
W.A. No.1577 of 2025
2025:KER:56062
injunction restraining the borrower/landlord from disturbing his
possession. Meanwhile, the High Court of Bombay in a criminal
public interest litigation held that a Magistrate has the power to
pass an order of eviction without giving an opportunity of hearing
to the tenant under the SARFAESI proceedings. An appeal against
the said order, along with a batch of other appeals, was heard by
the Apex Court in Harshad Govardhan [(2014) 6 SCC 1] and
directed the Magistrate to decide the application after giving the
tenants an opportunity of hearing. The appellant/tenant preferred
an application before the Chief Metropolitan Magistrate,
Esplanade, Mumbai, and after hearing, the Chief Metropolitan
Magistrate rejected that application holding that the appellant
tenant being a tenant without any registered instrument is not
entitled for possession of the secured asset for more than one year
from the date of execution of unregistered tenancy agreement in
accordance with the law laid down in Harshad Govardhan
[(2014) 6 SCC 1]. Aggrieved by the same, the appellant/tenant
filed the Special Leave Petition before the Apex Court, which
resulted in a judgment in Bajarang Shyamsunder Agarwal.
23
W.A. No.1577 of 2025
2025:KER:56062
26. Though at the time of passing the judgment in Bajarang
Shyamsunder Agarwal [(2019) 9 SCC 94] by the Apex Court,
Section 17(4-A) was incorporated in the SARFAESI Act by way of
amendment, the Court considered the earlier law since the same
alone was necessary for the decision in that case. Apart from the
principles laid down in Harshad Govardhan Case, the Apex
Court noted the judgment in Vishal N. Kalsaria v. Bank of India
and others [(2016) 3 SCC 762] wherein the issue was whether
a protected tenant under the Maharashtra Rent Control Act, 1999,
can be treated as a lessee and whether the provisions of the
SARFAESI Act will override the provisions of the Rent Act. In
Vishal N. Kalsaria [(2016) 3 SCC 762] after examining the
relevant legal provisions, the Apex Court held that while the
SARFAESI Act has a laudable objective of providing a smooth and
efficient recovery procedure, it cannot override the objective of
the Rent Act to control the rate of rent and provide protection to
tenants against arbitrary, and unreasonable evictions.
27. In Bajarang Shyamsunder Agarwal [(2019) 9 SCC
94] the Apex Court held that while agreeing with the principles
24
W.A. No.1577 of 2025
2025:KER:56062
laid down in Vishal N. Kalsaria [(2016) 3 SCC 762] that the
rights of the tenants under the Rent Act need to be respected in
appropriate cases, however, the holding with respect to the
restricted application of the non-obstante clause under Section 35
of the SARFAESI Act, to only apply to the laws operating in the
same field is too narrow and such a proposition does not follow
from the ruling in Harshad Govardhan [(2014) 6 SCC 1].
28. In Bajarang Shyamsunder Agarwal [(2019) 9 SCC
94], after opining that the objective of the SARFAESI Act, coupled
with the T.P Act and the Rent Act, are required to be reconciled,
the Court held as under:
“a) If a valid tenancy under law is in existence even prior to
the creation of the mortgage, the tenant’s possession cannot
be disturbed by the secured creditor by taking possession of
the property. The lease has to be determined in accordance
with Section 111 of the TP Act for determination of leases.
As the existence of a prior existing lease inevitably affects
the risk undertaken by the bank while providing the loan, it
is expected of Banks/Creditors to have conducted a standard
due diligence in this regard. Where the bank has proceeded
to accept such a property as mortgage, it will be presumed
that it has consented to the risk that comes as a
consequence of the existing tenancy. In such a situation, the
25
W.A. No.1577 of 2025
2025:KER:56062
rights of a rightful tenant cannot be compromised under the
SARFAESI Act proceedings.
b) If a tenancy under law comes into existence after the
creation of a mortgage, but prior to the issuance of notice
under Section 13(2) of the SARFAESI Act, it has to satisfy
the conditions of Section 65A of the T.P. Act.
c) In any case, if any of the tenants claim that he is entitled
to possession of a secured asset for a term of more than a
year, it has to be supported by the execution of a registered
instrument. In the absence of a registered instrument, if the
tenant relies on an unregistered instrument or an oral
agreement accompanied by delivery of possession, the
tenant is not entitled to possession of the secured asset for
more than the period prescribed under Section 107 of the
T.P. Act”. (underline supplied)
29. As noted above, the learned counsel for the appellant
would argue that in Shiju Mani [2024 (2) KHC 68], a learned
Single Judge of this Court held that a tenant in possession of a
secured asset on the basis of a valid tenancy, cannot be
dispossessed invoking Section 14 of the SARFAESI Act and for that
the Bank has to initiate steps under the provisions of the Rent
Control Act.
30. In Shiju Mani [2024 (2) KHC 68], the issue before a
learned Single Judge of this Court was regarding the eviction of a
26
W.A. No.1577 of 2025
2025:KER:56062
tenant who had been in possession of the secured asset much
before the creation of the mortgage in favour of the Bank, based
on an oral agreement. In Paragraph 53 of that judgment the
learned Single Judge held that even if a lease is terminated, if the
lease is falling within the ambit of the Rent Control Act, then
eviction of the tenant from the tenanted premises can be only by
resort to the provisions of the Rent Control Act. Such eviction has
to be on any of the grounds falling under Section 11. By relying
on Section 11(1) of the Rent Control Act, the learned Single Judge
observed that as per the said eviction, notwithstanding anything
to the contrary contained in any other law or contract, a tenant
shall not be evicted, whether in execution of a decree or otherwise,
except in accordance with the provisions of that Act. The learned
Single Judge by quoting Section 2(6) of the Rent Control Act held
that a tenant continuing in possession after the termination of his
tenancy also cannot be evicted from the building except under the
provisions of the Rent Control Act since the said Section defines a
tenant, so as to include a person continuing in possession after his
termination of tenancy as a statutory tenant.
27
W.A. No.1577 of 2025
2025:KER:56062
31. Though the learned Single Judge referred the judgment
of the Apex Court in Bajarang Shyamsunder Agarwal [(2019)
9 SCC 94] wherein it was held that the obstante clause in Section
35 of the SARFAESI Act cannot be given restricted application, by
stating that the Apex Court has also held in the same judgment
that the tenancy rights under the Rent Control Act need to be
protected in appropriate cases, the learned Single Judge held that
the petitioners therein who are in possession of the tenanted
premises for more than 50 years can be evicted only in compliance
of the provisions of the Rent Control Act.
32. In Shiju Mani [2024 (2) KHC 68] the learned Single
Judge held that Section 2(3) of the Rent Control Act defines the
term landlord to include the person who is receiving or is entitled
to receive the rent of a building, whether on his own account or
on behalf of another or on behalf of himself and others or as an
agent, trustee, executor, administrator, receiver or guardian or
who would so receive the rent or to be entitled to receive the rent,
if the building were let to a tenant and hence the Bank which has
a right to take over physical possession of the secured asset which
28
W.A. No.1577 of 2025
2025:KER:56062
is a tenanted premises, can resort to the provisions of the Rent
Control Act for evicting the tenants occupying the secured asset.
The provisions under sub-section (4)(d) of Section 13 of the
SARFAESI Act made for the secured creditor to demand any
person who has acquired any of the secured assets from the
borrower or from whom any money is due and may become due
to the borrower, to pay the secured creditor, so much of the money
as is sufficient to pay the secured debt was also taken into
consideration by a learned Single Judge to hold that the Bank can
be treated as a landlord for the purpose of the Rent Control Act to
evict the tenants in the secured assets.
33. In the instant case, the lease was created after the
mortgage. Therefore, the facts of Shiju Mani [2024 (2) KHC
68] are entirely different from the case at hand. However, since it
was argued by the learned counsel for the appellant that the
learned Single Judge held in Shiju Mani [2024 (2) KHC 68] that
a tenant in possession on the basis of valid tenancy can be evicted
from the premises only by resorting to the provisions of the Rent
Control Act, even if the lease is terminated, we are compelled to
29
W.A. No.1577 of 2025
2025:KER:56062
look into that aspect also in this judgment.
34. The Rent Control Act does not define lease. Section 105
of the T.P Act defines lease as under:
105. Lease defined.–A lease of immovable property is a
transfer of a right to enjoy such property, made for a certain
time, express or implied, or in perpetuity, in consideration
of a price paid or promised, or of money, a share of crops,
service or any other thing of value, to be rendered
periodically or on specified occasions to the transferor by
the transferee, who accepts the transfer on such terms.
Lessor, lessee, premium and rent defined.–The transferor
is called the lessor, the transferee is called the lessee, the
price is called the premium, and the money, share, service
or other thing to be so rendered is called the rent.”
35. Section 107 of the T.P Act deals with the manner in
which leases have to be made. The said Section reads thus:
“107. Leases how made. – A lease of immovable property
from year to year, or for any term exceeding one year, or
reserving a yearly rent, can be made only by a registered
instrument.
All other leases of immovable property may be made either
by a registered instrument or by oral agreement
accompanied by delivery of possession.
Where a lease of immovable property is made by a
registered instrument, such instrument or, where there are
more instruments than one, each such instrument shall be
30W.A. No.1577 of 2025
2025:KER:56062executed by both the lessor and the lessee.
Provided that the State Government may, from time to
time, by notification in the Official Gazette, direct that
leases of immovable property, other than leases from year
to year, or for any term exceeding one year, or reserving a
yearly rent, or any class of such leases, may be made by
unregistered instrument or by oral agreement without
delivery of possession”.
36. Section 111 of the T.P Act deals with the determination
of lease. The said Section is extracted hereunder:
“111. Determination of lease.–A lease of immovable
property determines–
(a) by efflux of the time limited thereby;
(b) where such time is limited conditionally on the
happening of some event–by the happening of such event;
(c) where the interest of the lessor in the property
terminates on, or his power to dispose of the same extends
only to, the happening of any event–by the happening of
such event;
(d) in case the interests of the lessee and the lessor in the
whole of the property become vested at the same time in
one person in the same right;
(e) by express surrender; that is to say, in case the lessee
yields up his interest under the lease to the lessor, by
mutual agreement between them;
(f) by implied surrender;
31
W.A. No.1577 of 2025
2025:KER:56062
(g) by forfeiture; that is to say, (1) in case the lessee
breaks an express condition which provides that, on breach
thereof, the lessor may re-enter or (2) in case the lessee
renounces his character as such by setting up a title in a
third person or by claiming title in himself; or
(3) the lessee is adjudicated an insolvent and the lease
provides that the lessor may re-enter on the happening of
such event; and in any of these cases, the lessor or his
transferee gives notice in writing to the lessee of his
intention to determine the lease;
(h) on the expiration of a notice to determine the lease, or
to quit, or of intention to quit, the property leased, duly
given by one party to the other”.
37. On anxious consideration of the various provisions
under the T.P Act, the Rent Control Act and the SARFAESI Act,
referred to above in the light of the judgments of the Apex Court
in Harshad Govardhan [(2014) 6 SCC 1] and Bajarang
Shyamsunder Agarwal [(2019) 9 SCC 94] we are of the firm
view that the protection under the provisions of the Rent Control
Act is available only to a tenant who was legally inducted to the
secured asset by the borrower and not to a tenant who occupy the
secured asset in violation of provisions of law. A proposition to the
contra will give rise to a situation wherein a cunning defaulter may
32
W.A. No.1577 of 2025
2025:KER:56062
induct a person to the secured asset by creating a false tenancy
with a view to defeat the steps that would be taken by the bank,
at any stage of the security proceedings. From the principles laid
down in Bajarang Shyamsunder Agarwal [(2019) 9 SCC 94]
it is evident that Section 35 of the SARFAESI Act has overriding
effect on all other laws having inconsistent provisions.
38. In Shiju Mani [2024 (2) KHC 68], the learned Single
Judge, after holding that a tenant in possession with valid tenancy
can be evicted only by taking recourse under Section 11 of the
Rent Control Act, in paragraph 60 of that judgment held that the
forum competent to decide the legal issue arising from the
proceedings under the SARFAESI Act is the Debts Recovery
Tribunal. The learned Single Judge by referring to Section 17(4-A)
of the SARFAESI Act held that if the Tribunal finds that the lease
or tenancy is one falling within the ambit of the Rent Control Act,
the Tribunal necessarily has to relegate the parties to the Rent
Control Court for eviction of the tenant. The learned Single Judge
has noted that the Debts Recovery Tribunal has jurisdiction to
examine whether a lease or a tenancy has expired or stood
33
W.A. No.1577 of 2025
2025:KER:56062
determined. Having noted so, the learned Single Judge held that
even if lease is terminated, if the lease is within the ambit of Rent
Control Act, the eviction of the tenant from the secured asset can
be only by resort to the provisions of the Rent Control Act. We are
unable to agree with the above reasoning of the learned Single
Judge. As discussed hereinabove, the protection to the tenant in
possession of a secured asset is available under the provisions of
the Rent Control Act, only if he is lawfully inducted and not to a
tenant who was inducted in violation of any of the provisions of
law that make the tenancy illegal. When Section 35 of the
SARFAESI Act gives overriding effect to that Act on all other laws
having inconsistent provisions, and Section 17(4-A) gives
authority to the Debts Recovery Tribunal to examine whether a
lease or a tenancy has expired or determined, then it is the Debts
Recovery Tribunal to determine that question. If the Tribunal finds
that the lease is not lawful or has already terminated, then there
is no necessity to relegate the parties to the proceedings under
the Rent Control Act. To that extent, the judgment of the learned
Single Judge in Shiju Mani [2024 (2) KHC 68] did not express
34
W.A. No.1577 of 2025
2025:KER:56062
the correct position of law.
39. While coming to the instant case, as noted above, the
appellant obtained the rooms on rent from the 2 nd respondent on
29.04.2023. The property of the 2nd respondent, including the
building wherein the appellant was inducted as a lessee, was
mortgaged to the 1st respondent Bank on 02.04.2014, much
before the execution of the lease deed, by creating an equitable
mortgage. Ext.R1(A) produced by the 1st respondent, along with
the counter affidavit filed in the writ petition, is the written
statement filed by the 1st respondent before the Debts Recovery
Tribunal-II, Ernakulam, in S.A. No.618 of 2024 with the Annexures
therein. The equitable mortgage was created initially on
02.04.2014 and subsequently extended on 01.01.2015,
28.03.2018, and 29.06.2022, as evident from the Annexures
produced with Ext.R1(A) written statement of the Bank. As per the
terms and conditions of the mortgage produced by the 1 st
respondent Bank, there is a condition as clause (i), which restrains
the mortgagor from creating any further charge, lien or
encumbrance over the assets and properties of the firm charged
35
W.A. No.1577 of 2025
2025:KER:56062
to the Bank in favour of any other Banks, Financial Institution,
Company, Firm or person without the Bank’s prior permissision in
writing. It also restrains the mortgagor from selling, assigning the
mortgage or otherwise disposing of any of the fixed assets charged
to the Bank and undertaking any activity other than that for which
the facilities have been sanctioned without prior written
permission of the Bank as per clauses (j) and (k). These conditions
were incorporated when the loan was initially sanctioned. On the
same terms and conditions, the loan was renewed on 13.11.2019.
For the second time also, the same terms and conditions were
incorporated while the loan was renewed on 29.06.2022.
40. Ext.P1 rent agreement executed between the appellant
and the 2nd respondent is for a period of seven years. As stipulated
under Section 107 of the T.P Act, the said rent agreement is
registered. However, while going through the materials on record,
it is evident that Ext.P1 rent agreement falls under the mischief of
violation of Section 65A(2)(e) of the T.P. Act. As already noted,
Section 65A(2)(e) provides that in the case of a lease of buildings,
whether leased with or without the land on which they stand, of a
36
W.A. No.1577 of 2025
2025:KER:56062
mortgaged property, the duration of the lease shall in no case
exceed three years and the lease shall contain a covenant for
payment of the rent and a condition of re-entry on the rent not
being paid within a time therein specified. Ext.P1 rent agreement,
being the one executed for a period of seven years and without a
covenant to re-entry in case of failure to pay the rent, violates this
clause in Section 65A of the T.P. Act. Since Ext.P1 lease deed was
executed contrary to Section 65A(2)(e) of the Transfer of Property
Act and the terms and conditions of the mortgage, the appellant
is not entitled to claim the benefit of a tenancy that created in her
favour. In that circumstance also, the appellant is not entitled to
claim that she can be evicted from the subject property only by
taking recourse under Section 11 of the Rent Control Act.
41. Apart from all, we notice that as rightly held by the
learned Single Judge, the filing of an original petition as O.P.(DRT)
No. 398 of 2024 by the appellant before this Court during the
pendency of the appeal before the Debts Recovery Appellate
Tribunal was suppressed while filing the writ petition. Such a
pleading is conspicuously absent in the writ petition. It is trite that
37
W.A. No.1577 of 2025
2025:KER:56062
the Relief under Article 226 of the is a discretionary one. It is
therefore fundamental that a litigant approaching the Court under
Article 226 of the Constitution of India should come with clean
hands and disclose all material facts. Non-disclosure or
suppression of material facts would disentitle a litigant from
obtaining any relief.
42. In Prestige Lights Ltd. v. State Bank of India
[(2007) 8 SCC 449] the Apex Court held that a prerogative writ
remedy is not available as a matter of course. In exercising its
extra – ordinary powers, a writ Court would need to bear in mind
the conduct of the party invoking such jurisdiction. If the applicant
does not disclose full facts or suppresses material facts or is
otherwise guilty of misleading the Court, the Court may dismiss
the action without adjudicating the matter.
43. In K.D.Sharma v. Steel Authority of India Ltd.
[(2008) 12 SCC 481] the Apex Court held as under:
“34. The jurisdiction of the Supreme Court under Article 32
and of the High Court under Article 226 of the Constitution
is extraordinary, equitable and discretionary. Prerogative
writs mentioned therein are issued for doing substantial
justice. It is, therefore, of utmost necessity that the
38W.A. No.1577 of 2025
2025:KER:56062petitioner approaching the writ court must come with clean
hands, put forward all the facts before the court without
concealing or suppressing anything and seek an appropriate
relief. If there is no candid disclosure of relevant and
material facts or the petitioner is guilty of misleading the
court, his petition may be dismissed at the threshold without
considering the merits of the claim.”
44. During the course of arguments, to a query made by
this Court, the submissions of the learned counsel for the
appellant was that O.P.(DRT) No.398 of 2024 was disposed by this
Court directing the Debts Recovery Tribunal, untrammelled by the
observations in that judgment and hence the appellant did not
plead regarding filing of that OP(DRT) in the writ petition. But,
while considering the nature of the dispute between the parties,
we are of the view that the appellant ought to have disclosed the
filing and disposal of OP(DRT) No.398 of 2024 in the writ petition,
since the suppression of the same cannot be accepted, when
viewed in the angle of a fair litigation.
Having considered and pleadings and materials on record
and the submissions made at the Bar, in the light of the discussions
above, we find that the appellant is not entitled to claim protection
from eviction by resorting to the provisions under the Rent Control
39
W.A. No.1577 of 2025
2025:KER:56062
Act and hence not entitled to the reliefs sought under Article 226
of the Constitution of India. Consequently, we find no ground to
interfere with the impugned judgment of the learned Single Judge.
In the result, the writ appeal stands dismissed.
Sd/-
ANIL K.NARENDRAN, JUDGE
Sd/-
sks MURALEE KRISHNA S., JUDGE
[ad_2]
Source link