IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 08.03.2011 CORAM THE HONOURABLE MR.JUSTICE D.MURUGESAN AND THE HONOURABLE MR.JUSTICE S.NAGAMUTHU W.P.Nos.23850 & 27432 of 2010 and M.P.Nos.1 & 2 of 2010 W.P.No.23850 of 2010: Indian Bank Adyar Branch having its office at No.91, First Main Road Gandhi Nagar, Adyar Chennai 600 020 represented by its Authorised Officer/Assistant General Manager .. Petitioner -vs- 1. M/s Nippon Enterprises South represented by its Partner Mr.Chetan Acharya having its office at Sterling Silver No.24 and 25, Sivaganga Road Off Sterling Road, Nungambakkam Chennai 600 034 2. The Debts Recovery Appellate Tribunal Southern Region No.55, Wellington Estate Fourth Floor, Ethiraj Salai Egmore, Chennai 600 008 3. The Debts Recovery Tribunal-II Chennai, 4th Floor No.770-A, Spencer Towers Ethiraj Salai, Chennai 600 008 4. Mr.A.Ramakrishnan Advocate Commissioner Egmore Bar Association, Chennai 600 008 5. M/s Laxmi Narain Towers represented by Mr.Shyam Narain Mr.Bharat Shyam Narain Mr.Nanick Shyam Narain All are at No.3, Nallathambi Street Wallajah Road Chennai 600 002 .. Respondents https://hcservices.ecourts.gov.in/hcservices/ Petition under Article 226 of the Constitution of India, praying for the issue of a Writ of Certiorari, calling for the entire records in pursuance to the impugned order passed in R.A.(SA) No.61 of 2010 dated 30.9.2010 on the file of the second respondent herein and also to quash the same. For Petitioner :: Mr.G.Masilamani Senior Counsel for Mr.B.Murugavel For Respondents :: Mr.Habibullah Basha Senior Counsel for Mr.T.P.Sankaran for R1 R2 & R3 – Tribunal R4 - No appearance Mr.V.Jayachandran for M/s V.Jayachandran & Associates for R5 (a & b) Mr.M.Kempraj for R5 (c) Mr.Vijay Narayan Senior Counsel for Mr.R.Parthiban for petitioners in M.P.No.2 of 2010 W.P.No.27432 of 2010: M/s Nippon Enterprises South "Sterling Silver" 24 & 25, Sivaganga Road Off Sterling Road, Nungambakkam Chennai 600 034 represented by its Partner Mr.Chetan Acharya .. Petitioner -vs- 1. M/s Indian Bank Adyar Branch rep.by its Asst. General Manager cum Authorised Officer No.91, First Main Road Gandhi Nagar, Adyar Chennai 600 020 2. The Debts Recovery Appellate Tribunal Southern Region No.55, Wellington Estate 4th Floor, Ethiraj Salai Egmore, Chennai 600 008 3. M/s Laxmi Narain Towers rep.by its joint owners a. Sham Narain b. Bharat Sham Narain c. Nanick Sham Narain All are at No.3, Nallathambi Street Wallajah Road Chennai 600 002 .. Respondents https://hcservices.ecourts.gov.in/hcservices/ Petition under Article 226 of the Constitution of India, praying for the issue of a Writ of Certiorarified Mandamus, calling for the entire records ending with the orders dated 30.9.2010 made in R.A. (SA) No.61 of 2010, (SA No.92 of 2009 on the file of the DRT-II, Chennai) on the file of the Debt Recovery Appellate Tribunal at Chennai and quashing the same in so far as it relates to the following finding viz., "As the Lease Agreeement for the period 2000- 2015 through which the petitioners were in possession of the premises on the date of taking of possession by the Advocate Commissioner is an unregistered document, it has to be concluded that the lease is not in conformity with the provisions of the Transfer of Property Act and therefore in view of this it has to be held that the authorized officer is well within his powers to exercise his right of taking physical possession of the premises as per the provisions of the SARFAESI Act and the rules made thereunder." and directing the first respondent to restore possession of the premises viz., the entire ground floor and the shop Nos.B3 and B4 in the basement at Nos.71 and 72, Wallajah Road, Chennai 600 002 to the petitioners on this ground as well. For Petitioner :: Mr.Habibullah Basha Senior Counsel for Mr.T.P.Sankaran For Respondents :: Mr.G.Masilamani Senior Counsel for Mr.B.Murugavel for R1 R2 – Tribunal Mr.V.Jayachandran for M/s V.Jayachandran & Associates for R3 (a & b) Mr.M.Kempraj for R3 (c) COMMON ORDER D.MURUGESAN, J. Both the writ petitions relate to the order passed by the Debts Recovery Appellate Tribunal, Chennai dated 30.9.2010 made in R.A. (S.A.) No.61 of 2010. Writ Petition No.23850 of 2010 is filed by the Indian Bank, Adyar Branch (hereinafter called as "the bank") and Writ Petition No.27432 of 2010 is filed by M/s Nippon Enterprises South, Chennai (hereinafter called as "the tenant). 2. For disposal of both the writ petitions, we refer to the following facts as culled out from the respective affidavits filed in support of the writ petitions. M/s Elke Enterprises had availed certain financial facilities from the bank amounting to a sum of Rs.6,50,00,000/- under open cash credit facility and packing credit facility under the sanction ticket dated 16.10.2007. Those financial facilities were duly secured by creating equitable mortgage over the immovable properties belonging to one Mr.Shyam Narain and Mr.Bharat Shyam Narain situate at Laxmi Narain Towers at Door Nos.71 & 72, Wallajah Road, Triplicane, Chennai. Both the said Shyam Narain and Bharat Shyam Narain stood also as personal guarantors for the https://hcservices.ecourts.gov.in/hcservices/ financial facilities and created an equitable mortgage by way of deposit of original title deeds with the bank on 10.1.2008. M/s Nippon Enterprises South claims to be the tenant in occupation of the entire ground floor and Shop Nos.B3 & B4 in the basement of the said property. Petitioners in M.P.No.2 of 2010 in W.P.No.23850 of 2010 are the employees of the tenant. 3. M/s Elke Enterprises committed default in repayment of the financial facilities and therefore the bank invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter called as "the SARFAESI Act") and the asset of M/s Elke Enterprises was classified as Non Performing Asset and the bank issued notice dated 15.7.2008 under Section 13(2) of the SARFAESI Act. In spite of the said notice and within the period of sixty days, M/s Elke Enterprises did not clear the dues, which resulted in the bank issuing a notice dated 17.9.2008 under Section 13(4) for taking possession. A similar notice under Section 13(4)(d) was also issued to the tenant in respect of the portions of the property under their occupation. The said notice was also duly published in the newspapers. 4. On taking symbolic possession, the bank issued the sale notice dated 4.10.2008 fixing the auction date as 12.11.2008. Questioning the sale notice as well as the possession notice, M/s Elke Enterprises preferred appeal before the Debts Recovery Tribunal-II, Chennai in S.A.No.113 of 2008. The said appeal was dismissed by the Tribunal in its order dated 29.7.2009. This order was not questioned and therefore it became final. 5. As the bank could not take physical possession, it filed an application under Section 14 of the SARFAESI Act before the learned Chief Metropolitan Magistrate, Egmore, in which the tenant was arrayed as the third respondent. The learned Chief Metropolitan Magistrate passed the following order dated 1.6.2009 and the relevant portions read as under:- "......... 2. Whereas, after considering the entire materials, this Court is of opinion that u/s 14(1) of the Act, the petitioner is entitled to take possession/management of the schedule mentioned secured asset for sale. 3. Whereas, this Court intends to appoint an Advocate Commissioner to take possession of the schedule mentioned secured asset so as to enable the petitioner to sell the property to realise the outstanding dues. 4. You, Tr.Ramakrishnan, Advocate, Egmore Bar Association, Chennai is appointed as Advocate Commissioner to take possession and management of the schedule mentioned asset with the assistance of the Station House Officer of D1 Triplicane P.S., Chennai after taking inventory of the articles found in the premises and removing the inmates and https://hcservices.ecourts.gov.in/hcservices/ handover the secured asset to the petitioner so as to proceed to recover the amount due to the petitioner. 5........" 6. Pursuant to the above warrant, the Advocate Commissioner issued a notice dated NIL to the tenant, which was received by the tenant on 22.8.2009. As the manner in which the possession was taken is questioned, we are inclined to extract the contents of the said notice, which are as follows: "In tune with the orders of the Chief Metropolitan Magistrate Court, Egmore, Chennai, I had on this date the 20th of August 2009 executed the Warrant and taken possession of the property before the presence of the inmates by sealing the said premises. As you are aware, the shop / offices which was occupied by your goodself was closed and sealed in your presence. The articles available at your shop may be removed from the said premises for the Indian Bank to have peaceful possession. You are hereby advised to be present on 25th Tuesday, August 2009 at 11.00 AM at your shop to facilitate taking inventory of the articles which are available in the said shop / office by the undersigned and you may make arrangements to remove the same at your cost and expenses. Please take note that in the event of you not being present on the said date, the undersigned will be completing the process as per the warrant and bank shall not be in any manner responsible / liable for any loss or pilferage." It is claimed that the tenant had removed the perishable materials from the premises occupied by them on 25.8.2009. Thereafter, the tenant filed W.P.No.17337 of 2009 seeking for an order prohibiting the bank from taking possession of the entire ground floor and shop numbers B3 & B4 in the basement at the premises in Door Nos.71 & 72, Wallajah Road, Chennai. The writ petition was dismissed by order dated 25.8.2009 on the ground that a provision of appeal was available to the tenant to question the action of the bank to take possession. This Court also observed that the tenant is entitled to approach the Debts Recovery Tribunal on the question as to the applicability of Section 31(e) of the SARFAESI Act and in such event, the Tribunal would consider the said question as well. The tenant thereafter approached the Debts Recovery Tribunal-II, Chennai by filing S.A.No.92 of 2009 for a direction to the bank as well as the Advocate Commissioner to remove the seal affixed on the business premises, namely, the entire ground floor and B3 & B4 in the basement of the building in question. https://hcservices.ecourts.gov.in/hcservices/ 7. By order dated 28.8.2009, though the Tribunal refused to grant interim relief for restoring the possession of the schedule mentioned property, granted interim order restraining the bank as well as the Advocate Commissioner from removing the equipments and other materials stored in the business premises of the tenant. 8. The following issues were framed by the Tribunal in S.A.No.92 of 2009: (i) Whether the applicants are lawful tenants in occupation of that portion of schedule mentioned property under the R3? (ii) Whether the applicant, which is admittedly a partnership firm, has been registered and if so, whether they can sue the R1? (iii) Whether the R1 bank is entitled to take physical possession of the schedule mentioned property by executing the warrant issued by the Hon'ble Chief Metropolitan Magistrate, Chennai overlooking the fact that the tenancy of the applicant is 15 years prior to the creation of mortgage by R3 in favour of the R1? (iv) Whether the applicants are entitled to the relief sought for in the application? So far as the first issue is concerned, the Tribunal found that the respondent no.3, namely, the tenant was lawful tenant in occupation of the premises. As regards the second issue, the Tribunal found that the bank cannot be sued by an unregistered partnership firm. So far as the third issue is concerned, the Tribunal found that the bank was empowered to approach the Chief Metropolitan Magistrate under Section 14 to take physical possession of the property. In view of the above answers, the Tribunal ultimately found that the tenant was not entitled to the relief of restoration of possession and dismissed the appeal by its final order dated 24.11.2009. 9. The said order of the Tribunal was questioned by the tenant before the Debts Recovery Appellate Tribunal, Chennai in R.A.(S.A.) No.61 of 2010. By order dated 30.9.2010, the Appellate Tribunal found that the tenant claims to be in possession under an unregistered lease agreement, which is not in conformity with Section 107 of the Transfer of Property Act, and hence did not agree with the finding of the Debts Recovery Tribunal. So far as the finding of the Debts Recovery Tribunal that an unregistered partnership firm cannot sue the bank is concerned, the Appellate Tribunal found that the partnership firm was a registered one and that the appeal under Section 17 was maintainable before the Debts Recovery Tribunal. The Appellate Tribunal further found that there was no lis arising out of a contract between the firm and the bank and therefore the provisions of Section 69(2) of the Indian Partnership Act were not attracted. So far as the order of the Debts Recovery Tribunal refusing to restore the possession to the tenant is concerned, the Appellate Tribunal found that in view of the failure of the Authorised Officer to adhere to the Rules 4(1), 4(2), 4(3), 4(4) and 8(1), 8(3) and 8(4) of the Security Interest (Enforcement) Rules, 2002 and in view of the fact that the Advocate Commissioner had exceeded the warrant of https://hcservices.ecourts.gov.in/hcservices/ commission, set aside the order of the Tribunal to that extent and directed the bank to handover possession of the premises to the tenant within a period of seven days from the date of receipt of a copy of the order. While directing the bank to handover possession of the premises to the tenant, the Appellate Tribunal also found that pursuant to the sale notice issued by the Authorised Officer, the property was sold in public auction on 28.7.2009 and the property was purchased by the bank itself. It was further found that by virtue of that sale, the bank became the owner of the premises and therefore it was no more the holder of the asset as a secured creditor. With that findings, the Appellate Tribunal held that the bank would be entitled to evict the tenant only in accordance with the provisions of the Tamil Nadu Buildings (Lease & Rent Control) Act, 1960. 10. The above order is questioned by the bank in W.P.No.23850 of 2010. Simultaneously, the tenant has also filed W.P.No.27432 of 2010 questioning that portion of the very same order of the Appellate Tribunal holding that the bank would be entitled to take possession of the premises from the tenant on the ground that the lease deed was not registered as required under Section 107 of the Transfer of Property Act. 11. We have heard Mr.G.Masilamani, learned senior counsel for the bank, Mr.Habibullah Basha, learned senior counsel for the tenant and Mr.Vijay Narayan, learned senior counsel appearing for the employees of the tenant. 12. Mr.G.Masilamani, learned senior counsel appearing for the bank has submitted that the lease commenced only from 1.8.2000, on which date the lease deed was executed for a period of 15 years upto 31.7.2015, and in terms of Section 107 of the Transfer of Property Act, the lease deed should be compulsorily registered. Hence, the tenant is not entitled to place reliance on the provisions of Section 31(e) to contend that the provisions of the SARFAESI Act are not applicable to the tenant. Hence, the bank would be justified in invoking the provisions of the SARFAESI Act to take possession of the premises by issuance of notice under Section 13(4) and by filing an application under Section 14. The learned senior counsel would also submit that Section 35 of the SARFAESI Act has overriding effect on any other law muchless the State law. The SARFAESI Act was enacted by the Parliament under Entry 45 of List I of Seventh Schedule, whereas the Tamil Nadu Buildings (Lease & Rent Control) Act was enacted by the State Legislature under Entry 6 of List III of Seventh Schedule. In view of Article 254(2) of the Constitution of India, in case of inconsistency between the laws made by the Parliament and the Legislature of the State, the law made by the Parliament shall prevail. Hence, the Appellate Tribunal has erred in holding that the tenant could be evicted only under the provisions of the Tamil Nadu Buildings (Lease & Rent Control) Act. He would also submit that the tenant being an unregistered partnership firm is not entitled to maintain an application before the Debts Recovery Tribunal in view of the bar under Section 69(2) of the Partnership Act. 13. On the other hand, Mr.Habibullah Basha, learned senior counsel appearing for the tenant, has submitted that the tenant is the lawful tenant/lessee under the joint owners of Laxmi Narain https://hcservices.ecourts.gov.in/hcservices/ Towers. The premises are jointly owned by one Mr.Shyam Narain, Mr.Bharat Shyam Narain and Mr.Nanick Shyam Narain right from 1992. The lease was on a consolidated monthly rent of Rs.87,746/- after deducting TDS of Rs.16,034/-. Hence, it is not correct to say that the lease commenced only from 1.8.2000. On the date when the mortgage was created in favour of the bank on 10.1.2008, the tenant was in occupation on the strength of a lease deed, though not registered. In the wake of Section 31(e), the provisions of the SARFAESI Act are not applicable to the lessee in bona fide occupation. He would also submit that inasmuch as the provisions of SARFAESI Act and the Tamil Nadu Buildings (Lease & Rent Control) Act operate on different fields, the question of overriding effect in terms of Section 35 does not arise. He would further submit that the application filed by the tenant, namely, unregistered partnership firm, is not barred under Section 69(2) of the Partnership Act, inasmuch as in the said application, no relief is claimed on the basis of the lease deed in which no security interest has been created and the said deed has been relied upon only for collateral purpose. He would therefore submit that the proceedings initiated by the bank are without jurisdiction. In such event, the tenant could be evicted only by invoking the provisions of the Tamil Nadu Buildings (Lease & Rent Control) Act, 1960. 14. We have carefully considered the above submissions. In view of the rival contentions, the following points arise for our consideration: (i) Can a lessee/tenant in bona fide occupation of a secured asset for more than a period of one year, could claim the benefit of the lease under Section 31(e) of the SARFAESI Act, in the event there was no registration of the lease deed as required under Section 107 of the Transfer of Property Act? If so, whether the tenant is entitled to invoke the provisions of Section 31(e) on the facts of this case? (ii) Whether, in terms of Section 35, the SARFAESI Act will override the provisions of the Tamil Nadu Buildings (Lease & Rent Control) Act, 1960, to enable the bank to evict a tenant and take physical possession of the secured asset either by invoking Section 13(4) or Section 14 of the SARFAESI Act? (iii) Whether an unregistered partnership firm is entitled to maintain an application before the Debts Recovery Tribunal in view of the bar under Section 69(2) of the Partnership Act? 15. Point No.(i): The contention of the tenant is that in view of Section 31(e), the provisions of the SARFAESI Act are not applicable in the instant case. According to the tenant, since it is a bona fide lessee under the borrower, even before the mortgage was created during the year 2007/2008, the proceedings initiated under the provisions of the SARFAESI Act are wholly without jurisdiction and, therefore, the entire proceedings are vitiated. On the other hand, Mr.G.Masilamani, learned senior counsel appearing for the bank https://hcservices.ecourts.gov.in/hcservices/ would contend that Section 31(e) of the SARFAESI Act has no application to the facts of the present case, inasmuch as the lease in question is not a registered lease as required under Section 107 of the Transfer of Property Act (for short, "the TP Act") and there was no lease in legal sense. 16. Section 31(e) contemplates that the provisions of the SARFAESI Act shall not apply to conditional sale, hire purchase or lease or any other contract in which no security interest has been created. The TP Act is a Central enactment which is traceable to Entry 6 of List III of Seventh Schedule of the Constitution of India. Subsequently, the Tamil Nadu Buildings (Lease & Rent Control) Act, 1960 (for short, "the TN Rent Control Act") came into force and the same is also traceable to the power of State Legislature under Entry 6 of List III of Seventh Schedule. The TN Rent Control Act has received the assent of the President and therefore, in the event if there is any inconsistency between the provisions of TN Rent Control Act and the provisions of TP Act, to the extent of inconsistency, the TN Rent Control Act shall prevail over the Central Act and shall have overriding effect. In this regard, we may usefully refer to the judgment of the Constitution Bench of the Supreme Court in V.Dhanapal Chettiar v. Yesodai Ammal, (1979) 4 SCC 214, wherein, after having considered the repugnancy between the TP Act and the TN Rent Control Act, in paragraph-5, the Supreme Court has held as follows:- "5. Under the Transfer of Property Act, the subject of "Leases of Immovable Property" is dealt with in Chapter V. Section 105 defines the lease, the lessor, the lessee and the rent. Purely as a matter of contract, a lease comes into existence under the Transfer of Property Act. But in all social legislations meant for the protection of the needy, not necessarily the so-called weaker section of the society as is commonly and popularly called, there is appreciable inroad on the freedom of contract and a person becomes a tenant of a landlord even against his wishes on the allotment of a particular premises to him by the authority concerned. Under section 107 of the Transfer of Property Act 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. None of the State Rent Acts has abrogated or affected this provision. Section 108 deals with the rights and liabilities of lessors and lessees. Many State Rent Acts have brought about considerable changes in the rights and liabilities of a lessor and a lessee, largely in favour of the latter, although not wholly. The topic of Transfer of Property other than agricultural land is covered by Entry 6 of List III to the Seventh Schedule to the Constitution. The subject being in the Concurrent List, many State Rent Acts have by necessary implication and many https://hcservices.ecourts.gov.in/hcservices/ of them by starting certain provisions with non obstante clause have done away with the law engrafted in Section 108 of the Transfer of Property Act except in regard to any matter which is not provided for in the State Act either expressly or by necessary implication." For better appreciation, it is necessary to have a look into the provisions of the TP Act as well as the TN Rent Control Act and to see as to whether there is any inconsistency between Section 107 of the TP Act and Section 10 of the TN Rent Control Act. 17. Though, to create a valid lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, a registered instrument is necessary under Section 107 of the TP Act, there is no such legal requirement as per the provisions of the TN Rent Control Act. The term 'landlord' has been defined in Section 2(6) and the same reads as follows:- "2(6). 'landlord' includes 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