Allahabad High Court: In a writ petition filed by Axis Bank seeking a direction to the Sub- Divisional Magistrate (‘SDM’) to take physical possession of the suit property that Axis bank had acquired as a secured asset under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (‘SARFAESI Act’), 2002, the Division Bench of Shekhar B. Saraf* and Praveen Kumar Giri, JJ., held that it was patently clear that the registered lease deed was executed by the borrower after taking the loan, without the knowledge of the secured creditor, Axis Bank. Accordingly, the Court directed the authorities to give possession of the suit property to Axis Bank within 8 weeks.
Background
An order was passed in favour of Axis Bank under Section 14 of the SARFAESI Act for the suit property, but physical possession was not provided.
The State contended that the borrowers had mortgaged the suit property after the loan grant. Furthermore, a tenant of the borrowers had filed a suit and obtained a stay order from the Civil Court without making Axis Bank a party in the said suit.
Analysis
Upon perusal of the judgments relied upon by Axis Bank, the Court stated that it was clear that the tenancy that was created during the pendency of the mortgage without permission of the secured creditor, i.e., Axis Bank, would be subject to the condition of Section 65A of the Transfer of Property Act, 1882, which describes a mortgagor’s power to lease. Furthermore, whether these conditions were satisfied would have to be decided by the Debts Recovery Tribunal (‘DRT’) only. The Court reiterated that a tenant was required to move an application under Section 17 of the SARFAESI Act before the DRT to assert his rights under such a registered document.
The Court held that once an order was passed under Section 14, the authorities were required to act in pursuance of the same and as per the provisions of the Act.
“The mechanism used by the borrowers to wiggle out of their liability cannot be countenanced by us.”
The Court held that in the present case, it was patently clear that after the loan was taken by the borrowers, the registered lease deed was executed by the borrower without Axis Bank’s knowledge. In such a case, the tenant had to approach the DRT and obtain the necessary orders therein. However, the tenant obtained an order of status quo/stay from the Civil Court by allegedly suppressing the material facts, including the fact that the suit property was mortgaged by the borrower without reference to the secured creditor, i.e., Axis Bank.
Accordingly, the Court held that the authorities should act as per the judgment in Bajarang Shyamsunder Agarwal v. Central Bank of India (2019) 9 SCC 94 and give possession to Axis Bank. Furthermore, the stay order obtained by the tenant, wherein Axis Bank was not made a party, was non-est in law as it violated Section 34 of the SARFAESI Act.
Thus, the Court directed the authorities to act per the law and give possession to Axis Bank within 8 weeks, if there was no other legal impediment. However, in case a stay order was obtained from the DRT, the authorities shall comply with such stay order.
[Axis Bank Ltd. v. State of U.P., Writ C No. 21492 of 2025, decided on 11-08-2025]
*Judgment authored by: Justice Shekhar B. Saraf
Advocates who appeared in this case:
For the petitioner: Arpita Tarmali and Sanjay Kumar Gupta
For the respondent: C.S.C.
