Saturday, 6 March 2021

Whether the civil court should reject the plaint if the SARFAESI Act bars the tenant's right to get back rented property?

 In the light of the above proposition, let us examine the

exclusionary provision in the Securitisation Act. Section 34 of the Act reads:

34. Civil Court not to have jurisdiction:- No civil court shall have

jurisdiction to entertain any suit or proceeding in respect of any

matter which a Debts Recovery Tribunal or the Appellate Tribunal is

empowered by or under this Act to determine and no injunction shall

be granted by any court or other authority in respect of any action

taken or to be taken in pursuance of any power conferred by or under

this Act or under the Recovery of Debts Due to Banks and Financial

Institutions Act, 1993 (51 of 1993).

36. In this context, on the tenant's rights, we may examine the

interplay between Section 17(4A) of the Securitisation Act and Section

65(A) of the Transfer of Property Act. Section 17(4A) of the

Securitisation Act reads:

Section 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 shall, 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 (4 of

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 lawfor 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. (italics supplied)

58. Thus, even if we keep aside the contentions on the cause of

action, it is very evident that no tenant pleading oral tenancy could get the protection from the provisions of the Securitisation Act. Besides that, as we have noted, Section 34 is emphatic in its declaration that Civil Court shall have no jurisdiction over any matter which the Debts Recovery Tribunal or the Appellate Tribunal is empowered under this Act to determine. And, last, none of the reliefs the petitioner has sought is amenable to an ordinary civil court’s jurisdiction.

IN THE HIGH COURT OF BOMBAY AT GOA

FIRST APPEAL NO.15 OF 2019

Modinasab Indikar V/s Board of Directors of Indian

Overseas Bank

Coram:- DAMA SESHADRI NAIDU, J.

Date:- 14th February 2020


The appellant claims to be a tenant. The first respondent is the

Board of Directors of the second respondent Bank; the third respondent,

the authorised officer, that is the Assistant General Manager of the Bank;

and the fourth respondent, according to the Bank, does not exist.

2. To ascertain the identity of the fourth respondent, I have asked

the learned counsel for the appellant. She has then consulted the appellant

present in the Court. He too has said he has no idea.

3. The fifth and sixth respondents are the borrowers. The seventh

respondent is the District Magistrate; the eighth respondent is the

Mamlatdar; and the ninth respondent, the SI of Police.


4. As narrated by both the learned counsel, the fifth and sixth

respondents borrowed the money in 2008 and later defaulted in repaying

it. So the Bank has approached the DRT to recover that money, and those

proceedings are said to be pending. Pending those proceedings, the Bank

invoked the Securitisation and Reconstruction of Financial Assets and

Enforcement of Securities Interest Act, 2002 (“the Securitisation Act”). It

issued notice under Section 13 of the Securitisation Act. It was on

24.11.2016.

5. To the Bank’s notice under Section 13 of the Securitisation Act,

the fifth and sixth respondents, that is the borrowers, did not respond.

Then, the Bank invoked Section 14 and approached the District

Magistrate for taking possession of the secured asset. In turn, on

25.07.2017, the District Magistrate passed an order, requiring the

Mamlatdar to take possession of the secured asset, with the help of the

police, and deliver it to the Bank.

6. In tune with the District Magistrate's order, on 08.09.2017, the

Mamlatdar and the Bank officials, along with the police, are said to have

gone to the secured asset. Then, the borrowers, as the Bank’s counsel

maintains, informed the Mamlatdar and others that “a case was filed”,

though they did not provide the details. Therefore, the Mamlatdar and

the Bank Officials returned.

7. Later, the Bank received the summons in Civil Suit No.23/2017


from Fast Track Court II, Margao. In fact, the appellant claimed to be the

tenant. He questioned the Bank’s efforts to dispossess him. On the date of

the first hearing, the Bank filed its written statement, besides filing a reply

in the appellant’s interlocutory application for stay. That apart, the Bank

also applied under Order VII Rule 11 of CPC, requiring the trial Court to

reject the plaint because it revealed no cause of action and the suit is

barred by law, too.

8. Initially, the trial Court granted no stay but later, according to

the Bank's counsel, the appellant mentioned the matter out of turn

without notice to the Bank and secured an ex parte stay. It was on

21.02.2018. Eventually, the Trial Court rejected the plaint on 11.01.2019.

The rejection was on the premise that the Civil Court has no jurisdiction

and that the plaint revealed no cause of action. Aggrieved, the appellant

has filed this First Appeal.

Submissions:

Appellant:

9. Ms. Maria Nedumpara, the learned counsel for the appellant,

advanced the arguments. At that stage, I queried with the advocate

whether she had the wakalatnama; then, she submitted that though she

had no wakalatnama she was willing to file one. So I permitted her to file

wakalatnama signed by the appellant, who is present in the Court. The

wakalatnama filed, the learned counsel has resumed her submissions.

5 fa no.15 of 2019

10. Ms. Maria Nedumpara has submitted that Section 17 (4) of the

Securitisation Act sets out the grounds of tenancy that could be

considered by the DRT. But here the tenant has raised larger issues which

could not be decided by the Tribunal. Therefore, it is unexceptionable that

the appellant has approached the Civil Court, which alone could grant the

relief the appellant has sought. In other words, Ms. Nedumpara has

insisted that the Civil Court does have jurisdiction.

11. To elaborate, Ms. Nedumpara has also contended that tenancy

falls under List II, that is the State List. So the scope of central legislation

concerning the disputes involving a tenant is limited. Even in that

context, the Civil Court must have jurisdiction.

12. When the Court queried about whether the appellant has filed

any proof before the trial Court about the tenancy, Ms. Nedumpara has

submitted that the tenancy is oral and equitable. When I further queried

about any rent receipts, she has submitted that she is not aware of that.

Later, she has also submitted that under equitable tenancy, the payment of

rent assumes no importance. Nevertheless, Ms. Nedumpara has repeatedly

told the Court that if this Court remands the matter, the appellant will

place every proof before the trial Court and establish that he is the tenant.

13. About the cause of action Ms. Nedumpara has drawn my

attention to the Supreme Court judgment in Dhulabhai v. The State of Madhya Pradesh AIR 1969 SC 78 and contended that the suit is eminently sustainable, but the trial Court has failed to consider it. Thus, she has urged this Court to allow the appeal.

Respondents:

14. Shri Ajay Kumar, the learned counsel for the respondent Bank,

has submitted that the appellant as the alleged tenant had been nowhere in the picture until the District Magistrate passed the order under Section 14 of the Securitisation Act. According to him, the notice under Section 13 of the Act was issued on 24.11.2016, and the District Magistrate passed the order under Section 14 on 25.07.2017. For all these months, the tenant did not choose to agitate the issue.

15. To elaborate, Shri Ajay Kumar has also submitted that the Bank

published the notice in the newspapers. Even then the alleged tenant did

not respond. He has also submitted that though the Bank officials visited

the property on more than one occasion, they found no other person than

the respondents no.5 & 6, the original borrowers and owners, at the

secured asset.

16. On the objective of the Securitisation Act and the devious

devices the borrowers adopt, Shri Ajay Kumar has drawn my attention to the Supreme Court’s judgment in Bajarang v. Central Bank of India2019 (9) SCC 94. He has submitted that the appeal lacks merit and deserves to be dismissed. Finally, Shri Ajay Kumar has submitted that though both before the trial Court and before this Court the respondent nos.5 & 6, that is the owners and borrowers, were put on notice, they did not respond. Had there been

any tenancy, they would have approached and informed the Court about it. According to him, that might have, in the end, benefited their own cause— buying more time.

Petitioner’s Reply:

17. In reply, Ms. Nedumpara has submitted that if at all the

landlord remained unresponsive, the tenant could not be blamed for that. Then, she has once again wanted the Court to remand the appeal to the trial Court, so the appellant could establish his case.

18. Heard Ms. Maria Nedumpara, the learned counsel for the

appellant, and Shri V. Ajay Kumar, the learned counsel for the respondents

no.1 to 3.

Discussion:

19. Indeed, as to the borrowing by the respondents 5 and 6, their

defaulting the loan, and their suffering orders under the Securitisation Act, the facts are not disputed. The dispute concerns the appellant: Is he a tenant?

20. The appellant filed Civil Suit No.23/2017 before the Fast Track

Court-II, Margao. In that suit, the appellant sought various reliefs. The Bank appeared and filed its counter-pleadings. Besides, it has also applied under Order VII Rule 11 of CPC. True, the appellant initially secured an interim order, which remained in force until the suit was dismissed. Eventually, the trial Court took up the Bank's application under Order VII Rule 11 and passed the impugned order. It rejected the plaint.

21. In the impugned order, the trial Court noticed that the appellant

wanted the trial Court to declare the Supreme Court's judgment in

Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd.3

as “sub silentio, nay per incuriam and to declare that investiture of a

jurisdiction of the District Magistrate”. Faced with this plea, the trial

Court has held that it has no jurisdiction to sit over the Supreme Court’s

judgment and consider its correctness, much less declare that the

judgment has “gone in silence” about certain statutory aspects of the

Securitisation Act. As to the cause of action, the trial Court has found that

the plaint on its comprehensive reading has revealed no cause of action.

Has the trial Court erred in rejecting the plaint?

22. The scope of Order 7, Rule 11 needs no reiteration. Challenged

as to its sustainability, the plaint should survive on its own—based on the

averments it contains. And the documents produced along with the plaint

should also form part of the plaint. At that stage, the defence, if any,

stands disregarded. Culled out from the judicial precedents, the

fundamental aspects of Order 7, Rule 11 are that this provision is not

exhaustive, nor does it affect the inherent powers of the court.

3

(2014) 6 SCC 1


23. If we examine the propositions of law further, the trial court

may well remember that if a meaningful (and not formal) reading of the

plaint shows that it is vexatious and meritless, disclosing no right to sue,

the court should exercise its power under Rule 11 to ensure that the

requirement of law is fulfilled. And if clever drafting has created the

illusion of a cause of action, it should be nipped in the bud. “An activist

Judge is the answer to irresponsible lawsuits.”4 In Ram Singh v. Gram

Panchayat, Mehal Kalan5, the Supreme Court noted when the suit is barred

by any law, the plaintiff cannot be allowed to circumvent the bar by clever

drafting. Finally, we may note that the court should look into not only the

plaint averments but also the documents filed and referred to in the plaint.

It is settled law that where a document is sued upon and is referred to in

the plaint, that document gets incorporated by reference in the plaint Church of Christ Charitable Trust And Educational Charitable Society v. Ponniamman Educational Trust, 2012 SCC 8 706

24. True, the appellant has relied on Dhulabai, rendered by a

Constitution Bench of the Supreme Court. It concerns the remedy of a

party in the face of a constitutionally invalidated provision. It pays to

examine the facts of Dhulabai.

25. In Dhulabai, the appellants are dealers in tobacco. They get their

tobacco locally within the state or import it from outside. Under the

4

T. Arivandandam v. T.V. Satyapal, AIR 1977 SC 2421

5

(1986) 4 SCC 364

Madhya Bharat Sales Tax Act, Section 3 requires every dealer to pay tax

regarding sales or supplies of goods in Madhya Bharat from 1st May

1950. Under the Act, the Government issued several notifications between

April 1950 and January 1954. All these notifications imposed the tax at

different rates on tobacco. The authorities collected tax in varying

amounts from the appellants for different quarters. Aggrieved, after

issuing notice under Section 80 of CPC, the appellants sued for refund of

the tax. They contended that the tax was illegally collected from them

being; it was unconstitutional.

26. In fact, the High Court of Madhya Pradesh, earlier, declared as

unconstitutional the notifications under which the State collected the tax

from the appellants. The decision was later confirmed by the Supreme

Court. That said, the appellants did not take recourse to Article 226 of the

Constitution but filed the suits.

27. Section 17 of the Madhya Bharat Sales Tax Act bars civil

court’s jurisdiction. No assessment made and no order passed under the

Act or the Rules by the assessing authority, appellate authority, or the

Commissioner shall be questioned in any Court. After elaborately

considering the precedential position on the point in issue, Dhulabhai has

held:

“(1) Where the statute gives a finality to the orders of the special

tribunals, the Civil Court's jurisdiction must be held to be excluded if

there is adequate remedy to do what the Civil Courts would normally

do in a suit. Such provision, however, does not exclude those cases

where the provisions of the particular Act have not been complied

with or the statutory tribunal has not acted in conformity with the

fundamental principles of judicial procedure.

(2) Where there is an express bar of the jurisdiction of the court, an

examination of the scheme of the particular Act to find the adequacy

or the sufficiency of the remedies provided may be relevant but is not

decisive to sustain the jurisdiction of the civil court.

. . .

(3) Challenge to the provisions of the particular Act as ultra vires

cannot be brought before Tribunals constituted under that Act. Even

the High Court cannot go into that question on a revision or reference from

the decision of the Tribunals.

(4) When a provision is already declared unconstitutional or the

constitutionality of any provision is to be challenged, a suit is open. A writ

of certiorari may include a direction for refund if the claim is clearly

within the time prescribed by the Limitation Act but it is not a

compulsory remedy to replace a suit.

(5) Where the particular Act contains no machinery for refund of tax

collected in excess of constitutional limits or illegally collected a suit

lies.

(6) Questions of the correctness of the assessment apart from its

constitutionality are for the decision of the authorities and a civil suit

does not lie if the orders of the authorities are declared to be final or

there is an express prohibition in the particular Act. In either case

the scheme of the particular Act must be examined because it is a

relevant enquiry.

(7) An exclusion of the jurisdiction of the Civil Court is not readily to be

inferred unless the conditions above set down apply.

(italics supplied)

28. In the light of the above proposition, let us examine the

exclusionary provision in the Securitisation Act. Section 34 of the Act

reads:

34. Civil Court not to have jurisdiction:- No civil court shall have

jurisdiction to entertain any suit or proceeding in respect of any

matter which a Debts Recovery Tribunal or the Appellate Tribunal is

empowered by or under this Act to determine and no injunction shall

be granted by any court or other authority in respect of any action

taken or to be taken in pursuance of any power conferred by or under

this Act or under the Recovery of Debts Due to Banks and Financial

Institutions Act, 1993 (51 of 1993).

29. In Mardia Chemicals v. Union of India7, the Supreme Court has

held that a full reading of Section 34 shows that the civil court’s

jurisdiction is barred “in respect of matters which a Debts Recovery

Tribunal or an Appellate Tribunal is empowered to determine in respect

of any action taken or to be taken under any power conferred under the

Act. “That is to say, the prohibition covers even matters which can be

taken cognizance of by the Debts Recovery Tribunal, though no measure

in that direction has so far been taken under Sub-section (4) of Section

13.”

30. Later, in Jagdish Singh v. Heeralal8, the Apex Court has held that

the opening portion of Section 34 clearly states that no civil court shall

have jurisdiction to entertain any suit or proceeding "in respect of any

matter" which a DRT or an Appellate Tribunal is empowered by or under

the Securitisation Act to determine. The expression 'in respect of any

matter' referred to in Section 34, according to Jagdish Singh, would take in

the "measures" provided under Sub-section (4) of Section 13 of the

Securitisation Act. Consequently, if any aggrieved person has any

grievance against any "measures" taken by the creditor under Sub-section

(4) of Section 13, the remedy open to him is to approach the DRT or the

Appellate Tribunal and not the civil court.

7

(2004) 4 SCC 311

8

AIR 2014 SC 371


31. Jagdish Singh emphasises that Civil Court in such circumstances

has no jurisdiction to entertain any suit or proceedings regarding those

matters which fall under Sub-section (4) of Section 13 of the

Securitisation Act. Further, Section 35 says, the Securitisation Act

overrides other laws if they contradict that Act, “which takes in Section 9

Code of Civil Procedure as well.” To conclude, Jagdish Singh holds that

“the civil court jurisdiction is completely barred.”

32. In the same vein, recently in Sree Anandhakumar Mills Ltd. v.

Indian Overseas Bank9, the Supreme Court has quoted with approval

Jagdish Singh. In Anandhakumar Mills, a person claiming to be a co-owner

sued for partition. The High Court of Madras has held that the suit is

maintainable in law, despite Section 34 of the Securitisation Act. Then, the

Supreme Court has held that under Sections 17 and 18 of the

Securitisation Act, the aggrieved party has an adequate and efficacious

remedy.

33. In Harshad Govardhan, the Supreme Court has held that only if

possession of the secured asset is required to be taken under the

Securitisation Act, will the secured creditor move the CMM or the

District Magistrate “for assistance to take possession of the secured

asset.”

34. In this context, Harshad Govardhan deals with the right of

9

2018 (10) SCJ 514


lessees to remain in possession of secured asset when the lease is

subsisting and how the Securitisation Act affects those rights. It holds that

if the lease precedes the mortgage or the security interest, the lessee is

entitled to enjoy the lease as per the terms of the lease. Even after making

the property a secured asset, the borrower can lease it out unless the

creditor—say the bank—prohibits the borrower from leasing out the

property. As declared under Section 35, the Securitisation Act overrides

any other law if there is anything inconsistent.

35. Indeed, Harshad Govardhan holds that if the lessee is in lawful

possession of the secured asset under a “valid lease,” the secured creditor

cannot take possession of the secured asset. Granted, any lease created

after the borrower’s receiving a notice under Section 13(2) is forbidden

under Section 13(13) of the Act; such a lease is invalid. In other words,

once a property is mortgaged, the borrower’s right to lease out the

mortgaged property depends on Section 65A of the Transfer of Property

Act.

36. In this context, on the tenant's rights, we may examine the

interplay between Section 17(4A) of the Securitisation Act and Section

65(A) of the Transfer of Property Act. Section 17(4A) of the

Securitisation Act reads:

Section 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 shall, 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 (4 of

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.

(italics supplied)

37. Now we will also extract Section 65A of the TP Act, and it

reads:

65A. (1) Subject to the provisions of sub-section (2), a mortgagor,

while lawfully in possession 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.

(italics supplied)

16 fa no.15 of 2019

38. In the light of the above statutory mandate, in Jayalakshmi N.

Pillai v. Authorized Officer10, Kerala High Court has held that Section

17(4A) of Securitisation Act, engrafted through an amendment on

01.09.2016, provides a forum for tenants to have their grievance redressed.

As seen from the above extract, the Debt Recovery Tribunal can resolve

all claims of tenancy or leasehold rights upon the secured asset. But to

assume jurisdiction, the Tribunal must ensure that the tenancy has not

expired or stood determined. Jurisdiction assumed, the Tribunal will rule

on whether the lease is contrary to Section 65(A) of the TP Act, or the

terms of the mortgage. It will also examine whether the lease has been

created after notice of default and demand by the Bank under Section

13(2) of the Act.

39. On the other hand, Section 65(A) of the TP Act elaborates on

mortgagor's power to lease. Section 65(A)(2)(b) mandates that every lease

shall reserve the best rent and "no premium shall be paid or promised, and

no rent shall be payable in advance." Under Clause (c) no lease shall

contain a covenant for renewal. Eventually, Clause (e) prescribes that if

the lease concerns a building, the duration of the lease shall not exceed

three years.

40. If we examine deeper, Harshad Govardhan also reveals that when

a lessee comes to know about the creditor’s efforts to take possession, he

10

2019 (1) KHC 838

17 fa no.15 of 2019

may either surrender the possession or resist the secured creditor’s

attempt. For this, he should produce before the authorised officer proof

that he was inducted as a lessee before the creation of the mortgage or

that he was a lessee under the mortgagor in accordance with the

provisions of Section 65A of the Transfer of Property Act. He should

also demonstrate that the lease has not been determined under Section

111 of the TP Act. If he resists the attempt of the secured creditor to

take possession, the authorised officer cannot evict the lessee by force but

has to apply before the Chief Metropolitan Magistrate (CMM) or the

District Magistrate under Section 14 of the Securitisation Act.

41. Finally, Harshad Govardhan interprets the second limb of

Section 34 of the Securitisation Act and holds that no court or authority should grant an injunction against any action taken or to be taken under the Securitisation Act.

42. I reckon the Supreme Court's recent judgment in Bajarang

Shyamsunder Agarwal squarely applies to the facts of this case. It pays to

examine the case in detail. The owner of a residential flat mortgaged it

with the bank and secured a loan. On his default, the bank invoked the

recovery proceedings. It issued a statutory demand notice under Section

13(2) of the Securitisation Act. When the borrower failed to comply with

its demand, the bank applied under Section 14 of the Act to take physical

possession of the secured asset. The CMM allowed that application.


43. Then, the appellant, claiming to be a tenant, applied to intervene

in the proceedings under Section 14. He wanted the CMM’s order stayed.

The appellant has asserted that the secured asset was let out to him by the

borrower/landlord in January 2000 and that he has been paying rent since

then. Indeed, the tenancy was said to be based on an oral agreement.

Allegedly faced with a notice from the landlord to vacate the flat, the

appellant filed a suit before the Court of Small Causes at Mumbai. In

course of time, the Small Causes Court granted interim injunction to the appellant.

44. Pending the civil suit, the appellant applied to the CMM not to

dispossess him. But the CMM rejected the application, “holding that the

appellant being a tenant without any registered instrument is not entitled

for the possession of the secured asset for more than one year from the

date of execution of unregistered tenancy agreement.” Aggrieved, the

appellant filed an appeal by Special Leave before the Supreme Court.

45. In the above factual context, to begin with, Bajarang

Shyamsunder Agarwal has considered the legislative purpose of the

Securitisation Act. It has held that the Act “in response to a scenario

where slow-paced recovery and staggering amounts of non-performing assets were looming over the banks.” The present Act is to enable the banks to resolve the issue of liquidity and aim for the reduction in the number of non-performing assets. The Preamble to the Act emphasises upon the efficient and expeditious recovery of bad debts.

46. Bajarang Shyamsunder Agarwal notes that Section 17 provides for

an invaluable right of appeal to any person including the borrower to

approach the Debt Recovery Tribunal. Quoting with approval Harshad

Govardhan, it has further held that the right of appeal is available to the

tenant claiming under a borrower, though the right of re-possession does

not exist with the tenant.

47. As is the case here, Bajarang Shyamsunder Agarwal, too, notes

that at no stage of the proceedings did the parties reveal about the

tenancy. “It was only after passing of the aforesaid order of the Chief

Metropolitan Magistrate, that the appellant tenant started agitating his

rights before the Small Causes Court.” The borrower/landlord, again as

happened here, did not even respond to the claims of the tenant. The bank

has produced multiple records to substantiate its claim that the tenant was

nowhere to be seen earlier and that this tenancy was created just to defeat

the proceedings initiated under the Securitisation Act. “On the contrary,

the appellant tenant has failed to produce any evidence to substantiate his

claim over the secured asset.” In such a situation, the appellant tenant

“cannot claim protection under the garb of the interim protection granted

to him, ex parte, by solely relying upon the xerox of the rent receipts.”

Here, even they are absent. In fact, it pays to analyse what Bajarang

Shyamsunder Agarwal says about the oral tenancy.


48. In paragraphs 33 and 36, Bajarang Shyamsunder holds that if it

is an oral lease, such tenancy impliedly does not carry any covenant for

renewal, as provided under Section 65-A of T.P. Act. Further, Section

13(13) of the Securitisation Act bars the lessor and the lessee from

entering into such tenancy beyond January 2012. Then, the person

occupying the premises, when the tenancy has been determined, can only

be treated as a ‘tenant in sufferance’. And he has no legal rights and is akin to a trespasser.

49. Bajarang Shyamsunder also declares that the Rent Act cannot be

extended to a ‘tenant in sufferance’ vis-à-vis the Securitisation Act because

of Section 13(2) read with Section 13(13) of that Act. A contrary

interpretation would violate the legislative efficacy of Section 13(13),

“which has a valuable role in making the SARFAESI Act a self-executory

instrument for debt recovery.” And, further, any contrary interpretation

would also violate the mandate of Section 35 of the Securitisation Act,

which is couched in broad terms.

Equitable Lease:

50. The appellant has pleaded equitable tenancy. According to him,

it is a common law doctrine that survives even the statutory onslaught. I

am afraid it does not. First, equity is not an offshoot or species of common

law. It is, in its origin, antithetical to common law. In fact, equity entered

where common law failed. Historically, the rigidity of common law has

given rise to equity. Later, they have come to be two streams, as Professor

Ashburner has described, flowing in the same channel but never mingling.

Lord Diplock disagreed. In United Scientific Holdings Ltd. v Burnley

Borough Council11, he has said that the ‘two streams’ have certainly mingled

now.

51. True, the Anglo-Saxon jurisprudence has come to India with

both the streams mixed. That said, it is elementary to note that both the

common-law and equity principles stand displaced to the extent a statute

occupies the adjudicatory arena. They are invoked where the statute is

silent. Further, even in the statutory scheme, they both play a vital role as

interpretative tools. Wherever a statute is ambiguous, its interpretation

must accord with the already-established common law or equity principles.

Thus, they fill the statutory crevices; they neither displace nor negate the

statute law, though.

52. An equitable lease, as the Oxford’s A Dictionary of Law12 defines,

is an agreement for the grant of an interest in land on terms that

correspond to a legal lease but do not comply with the necessary formal

requirements of a legal lease. For example, a landlord purports to grant

tenant a lease for seven years. But the transaction is effected by simple

written contract rather than by deed—a registered instrument. Still, the

11

[1978] AC 904

12

5th Ed. P.178


court may enforce the contract to grant the lease between the parties.

This follows the principle that “equity looks upon that as done which

ought to be done,” as was held in Walsh v Lonsdale13. That said, first, this

doctrine binds only the parties to that parole contract, but not a third

party. And, second, the very doctrine of Walsh v Lonsdale, as it is popularly

known, sets bounds to that equity principle: The doctrine will only

operate where the contract underlying the defective lease complies with

the law—say in the Indian context, for example, the Transfer of Property

Act—that otherwise governs the transaction. That is, the lease is in

writing, contains all express terms, is signed by all parties, provides for

consideration, and is specifically enforceable.

53. But the Privy Council has held, at least, in two cases—Ariff v.

Jadunath14 and Mian Pir Bux v. Sardar Modh. Tahir15—that no equitable

rule could override the provisions of the Transfer of Property Act or

Registration Act regarding writing or registration. So, evidently, the

doctrine of Walsh v. Lonsdale does not apply except in exceptional cases

where registration is not required.

54. In Ariff, the Privy Council notes that the Courts of equity in

England however have decided that once the making of the contract has

been established by the part performance of it, one of the parties to it

13

(1820) 21 Ch D 9

14

AIR 1931 PC 79

15

AIR 1934 PC 234

23 fa no.15 of 2019

shall not be permitted to use the Statute of Frauds as an instrument of

fraud. These decisions have been described in Britain v. Rossiter16 as "bold

decisions on the words of the statute," and the doctrine as of a nature

"not to be unwarrantably extended."

55. And Ariff has eventually held that whether an English equitable

doctrine should in any case be applied so as to modify the effect of an

Indian statute may well be doubted. Should an English equitable doctrine

affecting the provisions of an English statute relating to the right to sue

upon a contract be applied by analogy to such a statute as the Transfer of

Property Act? More particularly, is it permissible when the application of

the doctrine results in creating, without any writing, an interest which the

statute says can only be created by means of a registered instrument? To

their Lordships mind, in the absence of some binding authority to that

effect, the proposition is “impossible.”

56. Equivocal as the above proposition, Ariff eventually asserts that

“the doubt entertained by Mukerji, J., whether the equitable doctrine

‘which he thought was applicable could operate so as to nullify the

statutory requirement of a registered instrument,’ was justified.” Ariff,

finally, could not find the facts of that case raising any equity in the

respondent’s favour. Even if any such equity was established, Ariff holds,

it could not operate to nullify the provisions of the Indian Code relating

16

[1883] 11 Q.B. 123


to property and transfers of property.” We may note here that Bajarang

Shyamsunder, too, disallows transactions violating the statutory mandate

as contained, for example, in Transfer of Property Act and Registration

Act.

Reliefs Sought:

57. The petitioner wanted the Civil Court to declare that (a) he is an

equitable tenant; (b) his rights as tenant cannot be interfered with,

abrogated, or abridged; (c) Defendants 2 and 3 have no jurisdiction to

secure his forcible dispossession; (d) the District Magistrate is a coram non

judice; (e) the Supreme Court’s judgment in Harshad Govardhan Sondagar

“is rendered sub silentio, nay, per incuriam”; (f) the Supreme Court’s

judgment in Harshad Govardhan Sondagar is rendered sub silentio, if not

per incuriam; (g) the statue conferring jurisdiction on District Magistrate

would destroy or negate the separation of powers.

58. Thus, even if we keep aside the contentions on the cause of

action, it is very evident that no tenant pleading oral tenancy could get the protection from the provisions of the Securitisation Act. Besides that, as we have noted, Section 34 is emphatic in its declaration that Civil Court shall have no jurisdiction over any matter which the Debts Recovery Tribunal or the Appellate Tribunal is empowered under this Act to determine. And, last, none of the reliefs the petitioner has sought is amenable to an ordinary civil court’s jurisdiction.

Result:

59. Under these circumstances, I reckon that the appellant could not

establish that the plaint in his suit passes the judicial muster under Order

7, Rule 11 of CPC. At this juncture, I may note that for this adjudication

the plaint is the fulcrum, but the appellant has not filed a copy, though he

has secured interim protection and had the matter pending for

considerable time. So I render this judgment based on the rival

submissions and the material on record, including the impugned

judgment. As I find no grounds to interfere with the judgment, I dismiss

this appeal. No order on costs.

Tailpiece:

After the dictation was completed and the verdict pronounced, Ms.

Nedumpara for the appellant wanted the Court to suspend the operation

of this judgment for three weeks, so that the appellant could approach the

DRT, Mumbai. Shri Ajay Kumar for the respondent Bank has opposed

that plea. At any rate, the plaint rejected, there is no further legal hurdle

for the appellant to approach the DRT, Mumbai, if he chooses to. Thus, to

conclude, it is open for the appellant to exhaust all statutory or legal

options available to him in this regard.

DAMA SESHADRI NAIDU, J.


Print Page

No comments:

Post a comment