Case BriefsSupreme Court

Supreme Court: The Division Bench of S. Abdul Nazeer and Krishna Murari, JJ., addressed a pertinent issue of whether the rent act would come to the aid of a “tenant in sufferance”.

Instant appeals were directed against the Orders passed by the Chief Metropolitan Magistrate, Esplanade, Mumbai rejecting the application filed by the appellant for restraining HDFC Bank, the first respondent from taking possession of the property in the appellant’s possession.

Financial Facility of Rs 5,50,00,000 was granted by HDFC Bank Limited to respondents 2 and 3 (the borrowers). Borrowers had mortgaged a property (Secured Asset) in favour of the Bank with an intention to secure the said credit facility.

Later, the Borrowers accounts were declared at non-performing assets, the Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to the Borrowers.

Appellant submitted that he is the tenant of the Secured Asset and has been paying rent regularly to his landlord since inception of his tenancy.

Appellant approached the Magistrate seeking protection of his possession of the Secured Asset as the Magistrate was ceased with the petition under Section 14 of SARFAESI Act filed by the respondent 1 – Bank. Though the magistrate had dismissed the registered tenancy placed on record by the appellant.

Analysis, Law and Decision

Bench noted that the appellant’s case was that he is a tenant of the Secured Asset and has paid the rent in advance.

However, in the detailed representation sent in response to the notice issued under Section 13(2) of the SARFAESI Act, the Borrowers did not claim that any tenant was staying at the Secured Asset.

The appellant provided a rent receipt claiming tenancy after the date of creation of mortgage.

Procedural mechanism for taking possession of the Secured Asset was provided under Section 14 of the SARFAESI Act.

Section 17 of the SARFAESI Act provides for the right of appeal to any person including the borrower to approach Debt Recovery Tribunal (DRT). Section 17 has been amended by Act No. 44 of 2016 providing for challenging the measures to recover secured debts. Under the Amendment, possession can be restored to the borrower or such other aggrieved person.

 In the Supreme Court decision of Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd., (2014) 6 SCC 1, it was held that the right of appeal is available to the tenant claiming under the borrower.

In Kanaiyalal Lalchand Sachdev v. State of Maharashtra, (2011) 2 SCC 782, this Court has held that DRT can not only set aside the action of the secured creditor but even restore the status quo ante.

Court stated that in view of the appeal being in pendency from 2016, this Court proposes to examine the case on merits without directing the appellant to avail the alternative remedy.

A Three­ Judge Bench of this Court in Bajarang Shyamsunder Agarwal v. Central Bank of India, (2019) 9 SCC 94, after considering almost all decisions of this Court, in relation to the right of a tenant in possession of the secured asset, has held that if a valid tenancy under law is in existence even prior to the creation of the mortgage, such tenant’s possession cannot be disturbed by the secured creditor by taking possession of the property. If a tenancy under law comes into existence after the creation of a mortgage but prior to issuance of a notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65­A of the Transfer of Property Act, 1882. If a tenant claims 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 said decision of this Court, it was clarified that in the absence of a registered instrument, if the tenant only relies upon 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 the provisions of the Transfer of Property Act.

While noting the above discussion, Bench held that,

“…Rent Act would not come to the aid of a “tenant­-in-­sufferance” vis­à­vis SARFAESI Act due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act.”

In the present matter, there was doubt as to the bona fide of the tenant, as there was no good or sufficient evidence to establish the tenancy of the appellant.

The pleading of tenancy was not supported by any registered document, and adding to this, the appellant himself stated that he was a “tenant-in-sufferance”, therefore, he is not entitled to any protection of the Rent Act.

Another point expressed by the Court, was that even if the tenancy had been claimed to be renewed in terms of Section 13(13) of the SARFAESI Act, the Borrower would be required to seek the consent of the secured creditor for transfer of the Secured Asset by way of sale, lease or otherwise, after issuance of the notice under Section 13(2) of the SARFAESI Act and, admittedly, no such consent has been sought by the Borrower.

In view of the above, appeal were dismissed. [Hemraj Ratnakar Salian v. HDFC Bank Limited, 2021 SCC OnLine SC 611, decided on 17-08-2021]

Case BriefsHigh Courts

Allahabad High Court: Vivek Kumar Birla, J., expressed:

“…a party cannot be permitted to blow hot – blow cold, where he knowingly accepts the benefit of a contract, or conveyance, or of an order, he is estopped from denying the validity of, or the binding effect of such contract, or conveyance, or order upon himself.”

Petition was filed challenging the impugned orders passed by the Prescribed Authority/Judge Small Causes Courts, Bulandshahar.

Petitioners were the tenants of a shop of which the initially the tenancy was with the grandfather of the petitioners. Later after the demise of grandfather, the legal heirs of the deceased i.e. Jugmandar Das Jain received the shop by means of inheritance.

Thereafter, respondents-landlords initiated the proceedings under Section 21(1)A of Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972  against the legal heir.

Crux of the Petitioners Argument:

If the compromise decree is contrary to statutory provisions, the same is a nullity and cannot be executed.

Analysis, Law and Decision

Original tenant was in possession of a shop 7.0 ft x 23 ft and in the release application filed on the ground f personal need of the family, he agreed to remain in possession of the shop 5.6 ft wide x 12 ft. deep only, which was to be handed over to him by the landlord after the Court Order.

Comprise between the parties reflected that the old rent of Rs 18 per month was to continue. The original tenant had clearly stated that he had only daughters and no son, he, therefore, agreed in the wisdom that he will remain in possession of the shop till his lifetime and thereafter, the tenancy shall not devolve on his legal heirs.

Bench noted that in the terms of compromise, it was clearly stated that there was a clear understanding that neither his daughters nor their husbands shall claim any tenancy over the shop left in possession of Raj Bahadur Jain and shall hand over the possession to the landlord and if they failed to do so, the landlord will be at liberty to take possession through Court.

Petitioners being daughters of the tenant were obviously beneficiary, maybe indirectly, of such compromise as the tenant Raj Bahadur Jain continued in peaceful possession of the said shop till his death as the proceeding of the release application did not proceed further on the basis of such compromise.

For about 16 years, no challenge was raised to the above-mentioned compromise.

“…in cases where protection under a Rent Act is available, no eviction can be ordered unless ground seeking eviction is made out, even if parties had entered into a compromise and that the invalidity on that count can even be raised in execution.” 

Whether petitioner can take shelter from the above law in the present set of facts and circumstances?

Bench opined that a party cannot be permitted blow hot – blow cold, where he knowingly accepts the benefit of a contract or conveyance, or of an order, he is estopped from denying the validity of, or the binding effect of such contract, or conveyance, or order upon himself.

For the above position of law, Bench referred to the Supreme Court decisions in Rajasthan State Industrial Development and Investment Corpn. v. Diamond & Gem Development Corpn. Ltd., (2013) 5 SCC 470.

Net effect of the Supreme Court decision in Raghunath Prasad Pande v. State of Karnataka, (2018) 5 SCC 594 is that once the compromise decree has been acted upon, a party cannot be permitted to go back from the same and the same is not liable to be set aside.

In the instant case, property was released in part and the old tenant had entered into a compromise. It has been added that he was the sole tenant and had every right to enter into compromise about his tenancy rights. The compromise continued for about 10 years till the death of the tenant Raj Bahadur Jain and they enjoyed the benefits arising out of such compromise.

Since the original tenant remained in possession over the agreed part of the accommodation during his lifetime, now the legal heirs cannot come forward and say that they are a statutory tenant and the said compromise was a nullity as they were not a party or that the same was contrary to law.

With regard to injunction suit, decree of a civil court granting permanent injunction cannot override the proceedings under the provisions of UP Act 13 of 1972 between the landlord and tenant.

Compromise was validly entered between the landlord and the sole tenant, who enjoyed the fruits or the benefits of the same.

Concluding the matter, Bench decided that :

  • Tenant-petitioner shall handover the peaceful possession of the premises in question to the landlord-opposite party on or before 31.8.2021;
  • Tenant-petitioner shall file the undertaking before the Court below to the said effect within two weeks from the date of passing of this order
  • Tenant-petitioner shall pay damages at Rs 2,000/- per month by 07th day of every succeeding month and continue to deposit the same in the Court below till 31.8.2021 or till the date he vacates the premises, whichever is earlier and the landlord is at liberty to withdraw the said amount
  • Tenant-petitioner shall also state that he will not create any interest in favour of the third party in the premises in dispute
  • Tenant-petitioner shall not be evicted from the premises in question till the aforesaid period.

[Anshu Jain v. Suresh Prakash, 2021 SCC OnLine All 217, decided on 10-03-2021]

Advocates before the parties:

Counsel for Petitioner: Nagendra Kumar Srivastava

Counsel for Respondent : Sanjai Srivastava, Ajit Kumar,Vivek Srivastava

Case BriefsSupreme Court

Supreme Court: Uday U. Lalit, J. delivered the judgment for Abhay Manohar Sapre, J.  and himself whereby the Court reiterated that no eviction can be ordered unless grounds for seeking eviction are made out.

The appellant-tenants and respondent-landlord entered into a lease agreement. Subsequently, the respondent wanted the premises to be evicted which effort was resisted by the appellants. The matter became a dispute and a police complaint was filed. A written settlement was reached between the parties under which the appellants agreed to vacate the premises. The appellant disputed the said agreement alleging that they were made to enter into the compromise by coercion under police pressure. The matter travelled through various competent authorities; the Principal Subordinate Judge allowed the application filed by the appellant; however, on appeal by the respondent, the High Court reversed the order of the said Judge. Aggrieved thus, the appellants preferred the instant appeal.

The Supreme Court referred to its earlier judgments including K. K. Chari v. R.M. Seshadri, (1973) 1 SCC 761 and Nagindas Ramdas v. Dalpatram Ichharam, (1974) 1 SCC 242. The Court observed that the common thread running through the judgments referred was that ‘in cases where protection under Rent Act is available, no eviction can be ordered unless grounds seeking eviction is made out, even in a case where parties have entered into a compromise. Moreover, invalidity on that count can even be raised in execution.’ In the present case, however, noted the Supreme Court, the order of the High Court did not even remotely note that any particular ground under the Rent Act was made out. In the view of the Court, the order passed by the Principal Subordinate Judge was correct and did not call for any interference by the High Court. Therefore, the order impugned was set aside and the appeal was allowed. [Alagu Pharmacy v. N. Magudeswari,2018 SCC OnLine SC 961, dated 14-08-2018]