HEMRAJ RATNAKAR SALIAN versus HDFC BANK LTD. & ORS.
[2021] 8 S.C.R. 529, Supreme Court of India, 2021
Outcome: Leave Granted & Dismissed (Dismissed)
Segment: Facts
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HEMRAJ RATNAKAR SALIAN
v.
HDFC BANK LTD. & ORS.
(Criminal Appeal No(s). 843-844 of 2021)
AUGUST 17, 2021
[S. ABDUL NAZEER AND KRISHNA MURARI, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: ss. 14, 13(2) and 13(13)
– Taking of possession of secured asset by the secured creditor –
Tenant restraining from taking possession of the secured asset –
Protection of tenant from eviction, in case of default by borrower
and the landlord – On facts, grant of financial facility to borrowers
by the respondent Bank – Credit facility secured by way of mortgage
of property-secured asset in favour of the Bank – Accounts of
borrower declared as non-performing assets – Issuance of notice
u/s. 13(2) by the Bank to the borrower – Appellant’s case that he is
the tenant of the secured asset on a monthly rent since inception of
tenancy – Petition u/s. 14 by the Bank – Intervention application by
appellant-tenant seeking protection of possession of the secured
asset – Dismissed by magistrate holding that no registered tenancy
placed on record – On appeal, Held: Neither registered instrument
produced nor any good or sufficient evidence adduced to establish
the factum of tenancy – Xerox copies of rent receipts were produced
however, the first xerox copy of rent receipt itself was of the date
which is after the creation of mortgage – No claim by the borrowers
that any tenant is staying at the Secured Asset – Also third-party
valuers confirmed that the borrowers were staying at the Secured
Asset – Furthermore, according to the appellant, he is tenant-in-
sufference, thus, not entitled to any protection of the Rent Act –
Even if tenancy is claimed to be renewed in terms of s. 13(13),
consent of secured creditor was required which was not sought –
Thus, the Magistrate rightly dismissed the application.
Dismissing the appeals, the Court
HELD: 1.1 In the instant case, there is a serious doubt as
to the bona fide of the tenant, as there is no good or sufficient
evidence  to establish the tenancy of the appellant. According to
[2021] 8 S.C.R. 529
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SUPREME COURT REPORTS
[2021] 8 S.C.R.
the appellant, he is a tenant of the Secured Asset from 12.06.2012.
However, the documents produced in support of his claim are
xeroxcopies of the rent receipts and the first xerox copy of the
rent receipt is of 12.05.2013 which is after the date of creation of
the mortgage. It is pertinent to note here that the Borrowers
have not claimed that any tenant is staying at the Secured Asset.
At the time of grant of facility, third-party valuers had also
confirmed that the Borrowers were staying at the Secured Asset.
The appellant pleaded tenancy from  12.06.2012  to 17.12.2018.
This is not supported by any registered instrument. Further, even
according to the appellant, he is a “tenant-in-sufferance”,
therefore, he is not entitled to any protection of the Rent Act.
Even if the tenancy has been claimed to be renewed in terms of
Section 13(13) of the SARFAESI Act, the Borrower would be
required to seek 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  the instant case. [Para 14][535-F-H; 536-A-B]
Harshad Govardhan Sondagar v. International Asset
Reconstruction Co. Ltd. & Ors. (2014) 6 SCC 1 : [2014]
11 SCR 605; Kanaiyalal Lalchand Sachdev v. State of
Maharashtra (2011) 2 SCC 782 : [2011] 2 SCR 602;
Bajarang Shyamsunder Agarwal v.
Central Bank of
India & Anr. (2019) 9 SCC 94 : [2019] 12 SCR 352 –
referred to.
Case Law Reference
[2014] 11 SCR 605
referred to
Para 9
[2011] 2 SCR 602
referred to
Para 9
[2019] 12 SCR 352
referred to
Para 12
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
Nos.843-844 of 2021.
From the Judgment and Order dated 30.12.2015 & 06.01.2016 of
the Chief Metropolitan Magistrate, Esplanade, Mumbai, in Case C.C.
No.381/SA/2014.
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Garvesh Kabra, Adv. for the Appellant.
Ateev Mathur, Gagan Gupta, Ms. Jagriti Ahuja, Harshvardhan
Jha, Mrs. Yugandhara Pawar Jha, Aman Pathak, Advs. for the
Respondents.
The Judgment of the Court was delivered by
S.ABDUL NAZEER, J.
1. Leave granted.
2. These appeals are directed against the Orders dated 30.12.2015
and 06.01.2016 in Case C.C. No.381/SA/2014 passed by the Chief
Metropolitan Magistrate, Esplanade, Mumbai, rejecting the Application
(Exh.-8) filed by the appellant herein for restraining HDFC Bank, the
first respondent herein, from taking possession of the property in the
appellant’s possession.
3. HDFC Bank had granted financial facility to respondent nos.2
and 3 (for short, ‘the Borrowers’) of Rs.5,50,00,000/- (Rupees Five Crore
Fifty Lakhs). On 03.04.2013, the Borrowers had mortgaged a property
bearing Flat No.501, 5th Floor, Solitaire, Village Kopari, Adi
Shankaracharya Road, MHADA Layout, Powai, Andheri (E), Mumbai
(for short, “the Secured Asset”) in favour of the Bank with an intention
to secure the said credit facility.
4. The accounts of the Borrowers were declared as non-
performing assets (NPA) on 31.10.2013. On 25.01.2014, the Bank issued
a notice under Section 13(2) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (for
short, “SARFAESI Act”) to the Borrowers.  It is the case of the appellant
that he is a tenant of the Secured Asset on a monthly rent of Rs.20,000/
- since
12.06.2012 with an increase of 5% every year. He has been
paying rent regularly to his landlord since inception of his tenancy.
5. The appellant filed Exh.8 application before 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 no.1-Bank.  Vide Order dated 30.12.2015,
the intervention application of the appellant was dismissed by the
Magistrate holding that there was no registered tenancy placed on record
by the appellant.
HEMRAJ RATNAKAR SALIAN v. HDFC BANK LTD. & ORS.
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6. We have heard learned counsel for the parties. Learned counsel
for the appellant would contend that the appellant is a protected tenant
under the provisions of the Maharashtra Rent Control Act 1999. He has
been paying rent regularly to the landlord. He has also paid advance rent
till 17.12.2018. There are continuous rent receipts with him from the
date of his induction as a tenant. The tenant was residing in the said
premises on the basis of an oral tenancy from 12.06.2012. Therefore, he
cannot be evicted from the Secured Asset without due process of law.
7. On the other hand, learned counsel for the respondent-Bank
submits that the rent receipt said to have been issued by the landlord for
the period from 12.06.2012 to 12.05.2013 is of 12.05.2013 which is after
the date of creation of mortgage in favour of the Bank. There is absolutely
no material to show that the tenancy was created earlier to the date of
mortgage. The tenancy pleaded by the appellant is an oral tenancy. At
the time of grant of facility, third-party valuers had confirmed that the
Borrowers were staying at the Secured Asset. The Borrowers, while
making representation to the Bank, have not claimed that any tenant is
staying at the Secured Asset. The tenancy claimed by the appellant is an
after-thought which cannot be believed in the facts and circumstances
of the case. He prays for dismissal of the appeal.
8. We have carefully considered the
submissions made at the Bar
and perused the materials placed on the record.
9. As noticed above, it is the case of the appellant that he is a
tenant of the Secured Asset since 12.06.2012 and has paid advance rent
upto 17.12.2018. The documents produced by the appellant are xerox
copies of the rent receipts. However, in response to the notice issued
under Section 13(2) of the SARFAESI Act, the Borrowers have sent a
very detailed representation wherein they have not claimed that any
tenant is staying at the Secured Asset. The appellant has pleaded tenancy
from 12.06.2012 to 17.12.2018.  The rent receipt claiming tenancy from
12.06.2012 is a xerox copy of 12.05.2013, which is after the date of
creation of mortgage.
10. Procedural mechanism for taking possession of the Secured
Asset is 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
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measures to recover secured debts (for short, “the Amendment”). Under
the Amendment, possession can be restored to the borrower or such
other aggrieved person. This Amendment has come into force w.e.f. 1st
September, 2016. This Court in Harshad Govardhan Sondagar v.
International Asset Reconstruction Co. Ltd. & Ors.1 has held that
right of appeal is available to the tenant claiming under the borrower.  In
Kanaiyalal Lalchand Sachdev v. State of Maharashtra2 this Court
has held that DRT can not only set aside the action of the secured creditor
but even restore the status quo ante. Therefore, an alternative remedy
was available to the appellant to challenge the impugned order under
Section 17 of the SARFAESI Act even before the amendment to Section
17 of the SARFAESI Act. However, given that the instant appeal has
been pending consideration before this Court from the year 2016, we
propose to examine the case on merits without directing the appellant to
avail the alternative remedy.
11. In Harshad Govardhan Sondagar (supra) this Court has
categorically held that if the tenancy claim is for any term exceeding
one year, the tenancy can be made only by a registered instrument. It
was held thus :
“36. We may now consider the contention of the respondents
that some of the appellants have not produced any document to
prove that they are bona fide lessees of the secured assets. We
find that in the cases before us, the appellants have relied on the
written
instruments or rent receipts issued by the landlord to the
tenant. Section 107 of the Transfer of Property Act provides that
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” and all other leases of immovable
property may be made either by a registered instrument or by oral
agreement accompanied by delivery of possession. Hence, if any
of the appellants claim that they are entitled to possession of a
secured asset for any term exceeding one year from the date of
the lease made in his favour, he has to produce proof of execution
of a registered instrument in his favour by the lessor. Where he
does not produce proof of execution of a registered instrument in
his favour and instead relies on an unregistered instrument or oral
1 (2014) 6 SCC 1
2 (2011) 2 SCC 782
HEMRAJ RATNAKAR SALIAN v. HDFC BANK LTD. & ORS.
[S.ABDUL NAZEER, J.]
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agreement accompanied by delivery of possession, the Chief
Metropolitan Magistrate or the District Magistrate, as the case
may be, will have to come to the conclusion that he is not entitled
to the possession of the secured asset for more than a year from
the date of the instrument or from the date of delivery of possession
in his favour by the landlord.”
12. A Three-Judge Bench of this Court in Bajarang Shyamsunder
Agarwal v. Central Bank of India & Anr.3, 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 65-A 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. It was held thus:
“24.1. 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 rights of a rightful tenant cannot be compromised
under the SARFAESI Act proceedings.
3 (2019) 9 SCC 94
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24.2. 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 65-A of the TP Act.
24.3. 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 TP Act.”
13. It was further held that the Rent Act would not come to the
aid of a “tenant-in-sufferance” vis-à-vis SARFAESI Act due to the
operation of Section 13(2) read with Section 13(13) of the SARFAESI
Act.  It was held as follows:
“35. The operation of the Rent Act cannot be extended to a “tenant-
in-sufferance” vis-à-vis the SARFAESI Act, due to the operation
of Section 13(2) read with Section 13(13) of the SARFAESI Act.
A contrary interpretation would violate the intention of the
legislature to provide for Section 13(13), which has a valuable
role in making the SARFAESI Act a self-executory instrument
for debts recovery. Moreover, such an interpretation would also
violate the mandate of Section 35, SARFAESI Act which is
couched in broad terms.”
14. In the
present case, first of all there is a serious doubt as to
the bona fide of the tenant, as there is no good or sufficient evidence to
establish the tenancy of the appellant. According to the appellant, he is a
tenant of the Secured Asset from 12.06.2012. However, the documents
produced in support of his claim are xerox copies of the rent receipts
and the first xerox copy of the rent receipt is of 12.05.2013 which is
after the date of creation of the mortgage. It is pertinent to note here
that the Borrowers have not claimed that any tenant is staying at the
Secured Asset. At the time of grant of facility, third-party valuers had
also confirmed that the Borrowers were staying at the Secured Asset.
Be that as it may. The appellant has pleaded tenancy from 12.06.2012 to
17.12.2018. This is not supported by any registered instrument. Further,
HEMRAJ RATNAKAR SALIAN v. HDFC BANK LTD. & ORS.
[S.ABDUL NAZEER, J.]
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even according to the appellant, he is a “tenant-in-sufferance”,
therefore, he is not entitled to any protection of the Rent Act. Secondly,
even if the tenancy has been claimed to be renewed in terms of Section
13(13) of the SARFAESI Act, the Borrower would be required to seek
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 the present case.
15. In view of above, we do not find any merit in these appeals
which are accordingly dismissed.
Nidhi Jain
Appeals dismissed.