Important provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002{SARFAESI Act}

 14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.

139[(1-A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him,—

(i) to take possession of such assets and documents relating thereto; and

(ii) to forward such assets and documents to the secured creditor.]

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate 140[any officer authorised by the Chief Metropolitan Magistrate or District Magistrate] done in pursuance of this section shall be called in question in any court or before any authority.

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How to appreciate evidence if there is an acknowledgement of liability in the Company's balance sheet for extension of limitation as per S 18 of the Limitation Act?

 A perusal of the aforesaid Sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills (supra), that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending limitation Under Section 18 of the Limitation Act.{Para 22}

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 323 of 2021, 3228, 3765 of 2020, 

Decided On: 15.04.2021

 Asset Reconstruction Company (India) Limited

Vs. Bishal Jaiswal and Ors.

Hon'ble Judges/Coram:

Rohinton Fali Nariman, B.R. Gavai and Hrishikesh Roy, JJ.

Author: Rohinton Fali Nariman, J.

Citation: MANU/SC/0279/2021

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Whether Magistrate must heard borrower before Allowing Possession Of Assets U/S 14 of SARFAESI Act?

The SARFAESI Act is intended to facilitate quick recovery of secured debts without extending any opportunity of hearing to a borrower and without judicial/quasi-judicial intervention till such time possession of the secured asset is taken by the secured creditor after serving the requisite notices and responding to the objection/representation that may be lodged/preferred by the borrower under section 13(3A). 

8. Pertinently, section 14 of the SARFAESI Act was amended twice, once in 2013 and then again in 2016. If it were the intention of the legislature to extend opportunity of hearing to a borrower before the District Magistrate/Chief Metropolitan Magistrate, as the case may be, it was free to do so. Advisedly, the legislature did not do so, for, it would have militated against the scheme of the SARFAESI Act and more particularly section 13 thereof. It is implicit in the scheme of the SARFAESI Act that natural justice, only to a limited extent, is available and not beyond what is expressly provided. There seems to be little merit in the argument advanced by Mr. Nedumpara and we hold that the language of section 14 is too clear and unambiguous, and does not admit of any requirement of complying with natural justice by putting the borrower on notice while an application thereunder is under consideration.

 IN THE HIGH COURT OF BOMBAY

Writ Petition (L) No. 8418 of 2022

Decided On: 23.03.2022

 C.A. Manisha Mehta and Ors. Vs. The Board of Directors and Ors.

Hon'ble Judges/Coram:

Dipankar Datta, C.J. and M.S. Karnik, J.

Citation:-MANU/MH/1377/2022

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Whether CMM or DM can adjudicate upon any objections raised by Borrower or anybody else while acting U/S 14 of SARFAESI Act?

 The jurisdiction of the CMM/DM under Section 14 of the

SARFAESI Act is purely ministerial and limited only to assisting

secured creditors in taking possession of secured assets and

nothing more. Section 14 of the SARFAESI Act does not

contemplate much less empower the DA to even consider much

less adjudicate upon any objections raised by Borrower or

anybody else. All that the DA is required to do when considering

an Application under Section 14 is (a) to ascertain that the

secured asset falls within his jurisdiction and (b) that the

secured creditor has complied with the requirements of Section

13 and 14 of the SARFAESI Act, and nothing else. Once the DA

is satisfied that the requirements of Section 13 and 14 have

been met and/or complied with, the DA has to proceed to take

possession of the secured asset. It is implicit on an examination

of Chapter III of the SARFAESI Act that the DA on finding that

the secured creditor has complied with Section 14 must act

promptly and with due dispatch in ensuring that possession of

the secured asset is recovered as quickly as possible. The very

objective of Chapter III of the SARFAESI Act is to enable secured

creditors to enforce their security interest without the

intervention of the court or tribunal. We find that in several

cases, the DA dispose off Applications under Section 14 not only

without granting assistance to secure creditors in recovering

possession of their secured assets but in fact granting relief

(directly or indirectly) to Borrowers and/or Third Parties as has

been done in the present case. What is indeed shocking (as in

the present case) is that reliefs are granted to Borrowers/Third

Parties not only in the teeth of the provisions of Section 14 but

also despite the fact that these Borrowers/Third Parties have not

even contested the steps taken by the secured creditors under

Section 13 for enforcement of their securing interest by filing

any application before the DRT under Section 17 of the

SARFAESI Act. We find that the DA under Section 14 of the

SARFAESI Act claim powers which they do not have under

Section 14 and proceed to pass orders which are completely

contrary to the provisions of Section 14 and the very object and

purpose of Chapter III of the SARFAESI Act. We find that the

conclusion reached by Respondent No. 1 in the impugned order

is a prime example of this very worrying trend. {Para 16}

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

WRIT PETITION NO.9749 OF 2021

 Phoenix ARC Private Limited  Vs. The State of Maharashtra

CORAM : K. R. SHRIRAM &

A. S. DOCTOR, JJ.

DATE : 03RD AUGUST, 2022

Coram:  A.S. DOCTOR, J.

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Whether DM or CMM can appoint an advocate to take possession of property as per the Sarfaesi Act?

 Whereas, applying the "functional subordination" test, we are persuaded to take the view that Sub-section (1A) of Section 14 of the 2002 Act is no impediment for the CMM/DM to engage services of an advocate (an officer of the court) -- only for taking possession of secured assets and documents relating thereto and to forward the same to the secured creditor in furtherance of the orders passed by the CMM/DM Under Section 14(1) of the 2002 Act in that regard. It does not follow that the advocate so appointed needs to be on the rolls in the Office of the CMM/DM or in public service. There is intrinsic de jure functional subordinate relationship between the CMM/DM and the advocate being an officer of the court. The apprehension of the borrowers about improper execution of orders of the CMM/DM passed Under Section 14(1) of the 2002 Act by the Advocate Commissioner, is plainly misplaced. Further, being an officer of the court and appointed by the CMM/DM, the acts done by the Advocate Commissioner would receive immunity Under Section 14(3) of the 2002 Act -- as an officer authorised by the CMM/DM. There is no reason to assume that the advocate so appointed by the CMM/DM would misuse the task entrusted to him/her and that will not be carried out strictly as per law or it would be a case of abuse of power. Rather, going by the institutional faith or trust reposed on advocates being officers of the court, there must be a presumption that if an advocate is appointed as commissioner for execution of the orders passed by the CMM/DM Under Section 14(1) of the 2002 Act, that responsibility and duty will be discharged honestly and in accordance with Rules of law. {Para 42}

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1637 of 2022 

Decided On: 25.02.2022

NKGSB Cooperative Bank Limited Vs. Subir Chakravarty and Ors.

Hon'ble Judges/Coram:

A.M. Khanwilkar and C.T. Ravikumar, JJ.

Author:A.M. Khanwilkar, J.

Citation: MANU/SC/0247/2022

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Whether Additional Chief Judicial Magistrate can pass order U/S 14 of SARFAESI Act?

We are in complete agreement with the view taken by the High Court that (i) the District Magistrate, Chief Metropolitan Magistrate is not a persona designata for the purposes of Section 14 of the SARFAESI Act; (ii) the expression “District Magistrate” and the “Chief Metropolitan Magistrate” as appearing in Section 14 of the SARFAESI Act shall deem to mean and include Additional District Magistrate and Additional Chief Metropolitan Magistrate for the purposes of Section 14 of the SARFAESI Act. {Para 12}

We hold that the powers under Section 14 of the SARFAESI Act can be exercised by the concerned Additional Chief Metropolitan Magistrates of the area having jurisdiction and also by the Additional District Magistrates, who otherwise are exercising the powers at par with the concerned District Magistrates either by delegation and/or special order. 

IN THE SUPREME COURT OF INDIA 

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 175 OF 2022;

M/s R.D. Jain and Co. Vs Capital First Ltd. & Ors.

Coram:  M.R. SHAH; J., B.V. NAGARATHNA; J. 

Author: M.R. SHAH, J.

Dated:  July 27, 2022 

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Supreme court: In the event of conflict between RERA and SARFAESI Act the provisions contained in RERA would prevail

 As held by the Supreme Court in the case of Bikram Chatterji (supra) in the event of conflict between RERA and SARFAESI Act the provisions contained in RERA would prevail.

(v) RERA authority has the jurisdiction to entertain a complaint by an aggrieved person against the bank as a secured creditor if the bank takes recourse to any of the provisions contained in Section 13(4) of the SARFAESI Act.” However, it is clarified that para 36(v) reproduced hereinabove shall be applicable in a case where proceedings before the RERA authority are initiated by the homer buyers to protect their rights. 

IN THE SUPREME COURT OF INDIA

Petition for Special Leave to Appeal (C) Nos.1861-1871/2022;

UNION BANK OF INDIA Vs RAJASTHAN REAL ESTATE REGULATORY AUTHORITY 

Bench: M.R. SHAH; B.V. NAGARATHNA, JJ.

 Date : 14-02-2022

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Whether non-voluntary transfer of ownership from defaulting borrower to the Bank under SARFAESI proceedings will result in assigning contractual rights under the Maintenance Agreement?

Cannes has argued that since the Sale Deed between TDI and Surya makes a reference to the Maintenance Agreement, combined with the fact that the Bank has admittedly stepped into the shoes of Surya, leads to the conclusion that such rights of the previous owner stands assigned to the new one. The Court is however unable to accept such an argument.

10. Replacing the owner of the property does not ipso facto lead to the conclusion that the Bank would also be bound by the Maintenance Agreement, which is a separate and a distinct agreement, executed between Surya and Cannes for availing CAM services for one unit in TDI Mall. Unarguably, the obligations and rights flowing from this agreement were distinct from those flowing from the Sale Deed, and cannot be jumbled together for the purpose of reading a privity of contract where there is none.

11. A party cannot be subjected to obligations of a contract to which it is not a party. A stranger or a third party cannot be bound if there no is assignment of contractual rights and liabilities. Certainly, the non-voluntary transfer of ownership from Surya to the Bank under SARFAESI proceedings does not result in assignment of contractual rights under the Maintenance Agreement. The burden of the liability acquired by Surya under a separate Maintenance Agreement, cannot be foisted on the Bank just because it has become the owner of the property. Surya’s liability under the Maintenance Agreement is not attached to the immovable property, even if it was in relation thereto. A mere general reference in the erstwhile Sale Deed to the Maintenance Agreement is insufficient to bind the Bank to the arbitration agreement contained in the Maintenance Agreement.

12. The Maintenance Agreement in its recital, does provide that it shall also bind the parties’ nominees, administrators, legal representatives and the assignee. Thus, the pertinent question is whether the Bank is an assignee under the Maintenance Agreement or not? There is no document on record to show that Surya had specifically assigned its rights and obligations, either in rem or specifically under the Maintenance Agreement, in favour of the Bank. In fact, Cannes also does not deny this fact. No averment has been made to any other document to urge that it would constitute as assignment of Surya’s rights to the Bank under the Maintenance Agreement. The court is thus unable to assume the existence of any assignment of rights. In order to be bound by the terms of the agreement, including the arbitration clause, the assignment of such rights has to be necessarily shown, by way of make a binding agreement between the parties. This is a pre-requisite to bind the Bank to arbitration.

 IN THE HIGH COURT OF DELHI AT NEW DELHI

 Date of Decision: 07th October, 2021 

ARB.P. 591/2020

 CANNES PROPERTY MANAGEMENT SERVICES PRIVATE LIMITED Vs ALLAHABAD BANK 

 CORAM: HON'BLE MR. JUSTICE SANJEEV NARULA

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Can a civil court entertain a suit if the plaintiff is pleading fraud without material particulars if it is barred as per S 34 of the SARFAESI Act?

 Having considered the pleadings and averments in the suit more particularly the use of word ‘fraud’ even considering the case on behalf of the plaintiff, we find that the allegations of ‘fraud’ are made without any particulars and only with a view to get out of the bar under Section 34 of the SARFAESI Act and by such a clever drafting the plaintiff intends to bring the suit maintainable despite the bar under Section 34 of the SARFAESI Act, which is not permissible at all and which cannot be approved.{ Para 8}

Supreme Court

JUSTICE M. R. SHAH JUSTICE SANJIV KHANNA

Electrosteel Castings Limited Vs. UV Asset Reconstruction Company Limited & Ors.

CIVIL APPEAL NO.6669 OF 2021

26th November 2021

Author: M. R. Shah, J.

Citation: 2021 ALL SCR (ONLINE) 697

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Whether A Tenant ­In ­Sufferance is Entitled To get Protection Of Rent Act in SARFAESI Proceedings?

It was further held that the Rent Act would not come to the aid of a “tenantinsufferance”  visàvis 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 “tenantinsufferance” visàvis 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

selfexecutory 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, thirdparty

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, even according to the appellant, he is a “tenantinsufferance”, 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.

 REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURSIDCITON

CRIMINAL APPEAL NO(s).843844 OF 2021

HEMRAJ RATNAKAR SALIAN  Vs HDFC BANK LTD. 

AUTHOR: S.ABDUL NAZEER, J.

Dated: August 17, 2021.

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Whether tenant pleading oral tenancy can get protection under SARFAESI Act?

  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.{Para 58}

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

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Whether the civil court has jurisdiction to try the suit in respect of parties' civil rights beyond the jurisdiction of DRT?

Keeping in mind the principles as laid down in Dhulabhai (supra), and what we have considered and discussed above, when we ask ourselves a question as to whether the DRT exercising jurisdiction under Sections 13 and 17 of the SARFAESI Act, has the power, nay jurisdiction to determine the Civil Law rights, which may be available to a person, in the security interest, in the same manner as a Civil Court could ? or in other words, can a person who claims a right of partition, specific performance, reliefs under Sections 31 and 34 of the Specific Relief Act, preemption, redemption, declaration in respect of a property which is a security interest, approach the DRT for claiming adjudication of his such claim ? and can the DRT grant him such relief ? In our considered opinion, the answer has to be in the negative for the reason that it is not permissible for the DRT to embark on an adjudication of the civil rights claimed vis-a-vis the security interest, in light of the clear, precise and specific language of Section 17 (1) and 18 of the DRT Act read with Sections 13, 17 and 34 of the SARFAESI Act, as already discussed above.

 If the DRT is not a Court as held in Nahar Industrial Enterprises Limited (supra), which still holds the field, and the jurisdiction of the DRT is limited and is confined to the extent of examination of the actions of the secured creditor under Section 13 (4) and Section 17 of the SARFAESI Act, within the framework of Sections 17 and 19 of the DRT Act 1993, then the DRT is jurisdictionally incapable and incompetent to adjudicate and decide upon the rights of a civil nature, accruing in favour of citizens, even if such rights are found to be accruing or created by law or otherwise, in the security interest. The jurisdiction to adjudicate and decide such rights of a civil nature, would then continue to vest with the Civil Courts under Section 9 of the C.P.C., whose jurisdiction though otherwise is plenary, omnipotent and unlimited, is limited only by the exclusion clause/provision in various Statutes, which exclusion clause/provision has to be strictly construed.

24. The purpose of creation of the Special Statutes i.e. the SARFAESI Act and the DRT Act, 1993, was to facilitate creation of special machinery for speedy recovery of the debts, due to Banks and Financial Institutions, which had gained alarming proportions and  still are alarmingly high, and not to obviate or set at naught the civil rights as available to litigants by availing the Civil Law remedy.

25. A meaningful interpretation has to be put to the language of the bar as contained in Section 34 of the SARFAESI Act so that the object and purpose sought to be achieved by the Act is not rendered illusory and is fulfilled. However, at the same time, the civil rights, which may be available in respect of security interest, cannot be lost sight of, which also have to be protected and the common law remedy available for the enforcement cannot be rendered ineffective. No doubt, Section 34 by creating a bar of jurisdiction ensures the recovery of public money in a speedy manner, however, the bar has to be read and construed in light of the language it contains and not otherwise so as to impeach upon the rights of a civil nature as available, which are equally important for a citizen. In the zeal to ensure speedy recovery of money, the civil rights which a citizen has, cannot be permitted to be rendered redundant and balance between both the rights has to be maintained, which would only be possible on a case to case basis. The bar under Section 34 of the SARFAESI Act, therefore, in view of the discussion made above, in our considered opinion, is not absolute, but is restricted to examination by the DRT of the actions of the secured creditor under Section 13 of the SARFAESI Act and the rights available under Section 17 of the SARFAESI Act, to be in accordance with the provisions of the SARFAESI Act and the Rules made thereunder, as indicated.

26. The propositions laid down in para 33 of Sagar Pramod Deshmukh (supra), in our considered opinion, correctly define the distinction between the jurisdiction of the Civil Court and that of the DRT vis-a-vis Section 9 of the C.P.C., as compared to Sections 17 (1) and 18 of the DRT Act read with Sections 13, 17 and 34 of the SARFAESI Act, though they may not be exhaustive.

27. In view of what we have discussed above, our considered opinion to the question as referred to is as under :-

Question :

"Whether the jurisdiction of a Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Section 17 of the Securitisation Act, in relation to enforcement of security interest of a secured creditor, is barred by Section 34 of the Securitisation Act ?

 Answer :

The answer, looking to the nature of the question, in our view, is in parts :-

(A) Jurisdiction of the Debts Recovery Tribunal, to decide all matters relating to Sections 13 and 17 of the SARFAESI Act, is exclusive.

(B) In all cases, where the title to the property, in respect of which a 'security interest', has been created in favour of the Bank or Financial Institution, stands in the name of the borrower and/or guarantor, and the borrower has availed the financial assistance, it would be only the DRT which would have exclusive jurisdiction to try such matters, to the total exclusion of the Civil Court. Any pleas as raised by the borrowers or guarantors, vis-a-vis the security interest, will have to be determined by the DRT.

(C) The jurisdiction of the Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Sections 13 and 17 of the SARFAESI Act, in relation to enforcement of security interest of a secured creditor, is not barred by Section 34 of the SARFAESI Act.

(D) Where civil rights of persons other than the borrower(s) or guarantor (s) are involved, the Civil Court would have jurisdiction, that too, when it is prima facie apparent from the face of record that the relief claimed, is incapable of being decided by the DRT, under Section 17 of the DRT Act, 1993 read with Sections 13 and 17 of the  SARFAESI Act.

(E) Even in cases where the enforcement of a security interest involves issues as indicated in Mardia Chemicals (supra) of fraud as established within the parameters laid down in A. Ayyasamy (supra); a claim of discharge by a guarantor under Sections 133 and 135 of the Contract Act [Mardia Chemicals (supra)]; a claim of discharge by a guarantor under Sections 139, 142 and 143 of the Contract Act; Marshaling under Section 56 of the Transfer of property Act [J.P. Builders (supra)]; the Civil Court shall have jurisdiction.

(F) Examples as indicated in para 22.3, are illustrative of the Civil Court's jurisdiction.

(G) The principles laid down in para 33 (i) to (ix) of Sagar Pramod Deshmukh (supra) are in accordance with what we have discussed and held above.

 

 Bombay High Court

Bank Of Baroda, Through Its Branch ... vs Gopal Shriram Panda And Another on 25 March, 2021

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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

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Important judgment on liability of bank in case of online fraud through SIM swapping and identity theft

 Thus, it is clear that the bank cannot claim any amount

from the customer when a transaction is shown to be a 'disputed

transaction'. The bank can recover from the customers only when it can

unequivocally prove that the customer was responsible for such

transaction, independently through the civil court. The RBI guidelines

is a clear mandate to exonerate a customer in such 'disputed

transaction'. RBI circular presumes the innocence of the customer in

such given circumstances. However, this innocence can be

controverted. The onus falls on the bank to prove otherwise.

21. In the present case, the police investigation prima facie

established that fraud has been committed. The beneficiaries hail from

West Bengal. There is nothing on record to establish any connivance

on the part of the petitioners. The police investigation also would

reveal that the accused obtained duplicate SIM cards by using fake

identity cards. It was also brought out that the beneficiaries

immediately withdrew the money from their bank accounts at West

Bengal. In such circumstances, the transactions can be treated as

'disputed transactions'. These transactions would fall within the sweep

of zero liability as referred to in RBI Circular. The remedy of the bank

in such circumstances is to approach the civil court and recover the

amount from the persons who were responsible for such transactions.

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT

 MR. JUSTICE A.MUHAMED MUSTAQUE

WP(C).No.28823 OF 2017(C)

 TONY ENTERPRISES  Vs RESERVE BANK OF INDIA

Dated this the 11th day of October, 2019

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Supreme Court: Protection From SARFAESI Act Not Available To Tenant-In-Sufferance

 It is pertinent to note that at the time when the SARFAESI Act

proceedings were pending, the factum of tenancy was never

revealed by the parties. The earlier order dated 09.03.2012,

passed by the Chief Metropolitan Magistrate, Esplanade, Mumbai

directing the Assistant Registrar to take over the possession of the

secured asset, is silent about any existing encumbrance over the

secured asset. It was only after passing of the aforesaid order of

the Chief Metropolitan Magistrate, that the appellanttenant

started agitating his rights before the Small Causes Court based

on a completely different fact scenario, without a whisper of the

alleged tenancy under the concluded Section 14, SARFAESI Act

proceedings. The respondent no.2borrower/

landlord did not even

respond to the claims of the appellanttenant.

The respondent

no.1bank

has produced multiple records to substantiate their

claim that the tenant was nowhere to be seen earlier and that this

tenancy was created just to defeat the proceedings initiated under

the SARFAESI Act. On the contrary, the appellanttenant

has

failed to produce any evidence to substantiate his claim over the

secured asset. In such a situation, the appellanttenant

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.

32. In such an event, wherein the claim of the appellanttenant

is not

supported by any conclusive evidence, the rejection of the stay

application by the Chief Metropolitan Magistrate cannot be held

to be erroneous. Although the counsel of the appellanttenant

has

placed ample reliance upon the Vishal N. Kalsaria Case (supra),

but the same would not help the cause of the appellanttenant

herein, as the earlier case proceeded with the assumption of a

valid and bona fide tenancy. But in the present case, the stay

application of the appellanttenant

seems to be an afterthought. It

is clear that the respondent no. 2borrower/

landlord never

intimated the respondent no. 1bank

about the alleged tenancy.

In light of the above, we are unable to accept the claim of bona

fide tenancy of the appellanttenant.

33. In any case, considering the counterfactual pleaded by the

appellanttenant

himself, that he was a tenant who had entered

into an oral agreement, such tenancy impliedly does not carry any

covenant for renewal, as provided under Section 65A

of T.P. Act.

Therefore, in any case, Section 13 (13) SARFAESI Act bars

entering into such tenancy beyond January, 2012. As the notice

under Section 13 (2) SARFAESI Act was issued on 30.04.2011,

subsequent reckoning of the tenancy is barred. Such person

occupying the premises, when the tenancy has been determined,

can only be treated as a ‘tenant in sufferance’. We should note

that such tenants do not have any legal rights and are akin to

trespassers.

34. In this context we may refer to R.V. Bhupal Prasad v. State of

A.P. and Ors., AIR 1996 SC 140, wherein a two Judge Bench of

this Court, speaking through Ramaswamy, J., made the following

pertinent observations in paragraph 8 of the Report:

"8. Tenant at sufferance is one who comes into

possession of land by lawful title, but who holds it,

by wrong after the termination of the term or expiry

of the lease by efflux of time. The tenant at

sufferance is, therefore, one who wrongfully

continues in possession after the extinction of a

lawful title. There is little difference between him

and a trespasser. "

35. On the same lines are the decisions of this Court in Smt. Shanti

Devi v. Amal Kumar Banerjee, AIR 1981 SC 1550, Murlidhar

Jalan (since deceased) through his Lrs. v. State of

Meghalaya and Ors., AIR 1997 SC 2690 and D.H. Maniar and

Ors. v. Waman Laxman Kudav, [1977] 1 SCR 403.

36. The operation of the Rent Act cannot be extended to a ‘tenantinsufferance’

visavis

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 selfexecutory

instrument for debt

recovery. Moreover, such an interpretation would also violate the

mandate of Section 35, SARFAESI Act which is couched in broad

terms.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1371 OF 2019

BAJARANG SHYAMSUNDER  AGARWAL Vs CENTRAL BANK OF INDIA 

N.V. RAMANA, J.

Dated:September 11, 2019.

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Whether tenancy court can decide dispute between tenant and secured creditor?

 A further question of law raised in these appeals is
whether the tenants have remedies under the
concerned tenancy law. In the State of Maharashtra,
the Maharashtra Rent Control Act, 1999 is in force
and this Act applies to premises let for the purposes of
residence, education, business, trade or storage
specified in Schedule I and Schedule II of the Act as
well as houses let out in areas to which the Bombay
Rents, Hotel and Lodging House Rates Control Act,
1947 applied before the commencement of the Act.

Section 33 of the Maharashtra Rent Control Act is
titled ‘Jurisdiction of courts’ and it provides that the
courts named therein ‘shall have jurisdiction to
entertain and try any suit or proceeding between a
landlord and a tenant relating to the recovery of rent
or possession of any premises and to decide any
application made under the Act and the applications
which are to be decided by the State Government or
an officer authorised by it or the Competent Authority.
The question of law that we have to consider is
whether the appellants as tenants of premises in the
State of Maharashtra including Mumbai will have any
remedy to move these courts having jurisdiction under
Section 33 of the Maharashtra Rent Control Act and
obtain the relief of injunction against the secured
creditor taking possession of the secured asset from
the appellants. The answer to this question is in
Section 34 of the SARFAESI Act, which is extracted
hereinbelow:
“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).
A reading of the second limb of Section 34 of the SARFAESI
Act would show that 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
the Act. Thus, when action is sought to be taken by the
secured creditor under Section 13 of the SARFAESI Act or
by the Chief Metropolitan Magistrate or the District
Magistrate under Section 14 of the SARFAESI Act, the Court
or the authority mentioned in Section 33 of the
Maharashtra Rent Control Act cannot grant the injunction
to prevent such action by the secured creditor or by the
Chief Metropolitan Magistrate or the District Magistrate.
Even otherwise, Section 33 of the Maharashtra Rent Control
Act vests jurisdiction in the courts named therein to decide
disputes between the landlord and the tenant and not

disputes between the secured creditor and the tenant under
landlord who is a borrower of the secured assets.
 Reportable
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL No. 736 OF 2014
(Arising out of S.L.P. (Crl.) No.1666 of 2012)

Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. & Ors.,

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Rights of tenant under SARFAESI amendment act 2016

141[17. Application against measures to recover secured debts].—(1) Any person (including borrower) aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this chapter, 142[may make an application along with such fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:

143[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.]

144[Explanation.—For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.]

145[(1-A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction—

(a) the cause of action, wholly or in part, arises;

(b) where the secured asset is located; or

(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being.]

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Provisions of Sarfaesi Act is not applicable in following cases

31. Provisions of Sarfaesi Act not to apply in certain cases.—The provisions of this Act shall not apply to—

(a) a lien on any goods, money or security given by or under the Indian Contract Act, 1872 (9 of 1872) or the Sale of Goods Act, 1930 (3 of 1930) or any other law for the time being in force;

(b) a pledge of movables within the meaning of Section 172 of the Indian Contract Act, 1872 (9 of 1872);

(c) creation of any security in any aircraft as defined in clause (1) of Section 2 of the Aircraft Act, 1934 (24 of 1934);

(d) creation of security interest in any vessel as defined in clause (55) of Section 3 of the Merchant Shipping Act, 1958 (44 of 1958);

(e) 183[* * *]

(f) any rights of unpaid seller under Section 47 of the Sale of Goods Act, 1930 (3 of 1930);

(g) 184[any properties not liable to attachment (excluding the properties specifically charged with the debt recoverable under this Act)] or sale under the first proviso to sub-section (1) of Section 60 of the Code of Civil Procedure, 1908 (5 of 1908);

(h) any security interest for securing repayment of any financial asset not exceeding one lakh rupees;

(i) any security interest created in agricultural land;

(j) any case in which the amount due is less than twenty per cent of the principal amount and interest thereon.

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When land should not be treated as agricultural land even if revenue record shows that it is agricultural land?

 In the present case, security interest was created in respect of several parcels of land, which were meant to be a part of single unit i.e. the five star hotel in Goa. Some parcels of land now claimed as agricultural land were apparently purchased by the debtor from agriculturists and are entered as agricultural lands in the revenue records. The debtor applied to the revenue authorities for the conversion of these lands to non-agricultural lands which is pending till date due to policy decision.

40. It is undisputed that these lands were mortgaged in favour of the creditor under a deed dated 26.02.2010. Obviously, since no security interest can be created in respect of agricultural lands and yet it was so created, goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis. The undisputed position is that the total land on which the Goa Hotel was located admeasures 182225 sq. mtrs. Of these, 2335 sq. mtrs. are used for growing vegetables, fruits, shrubs and trees for captive consumption of the hotel. There is no substantial evidence about the growing of vegetables but what seems to be on the land are some trees bearing curry leaves and coconut. This amounts to about 12.8 % of the total area.

The mortgage is thus intended to cover the entire property of the Goa Hotel. Prima facie, apart from the fact that the parties themselves understood that the lands in question are not agricultural, it also appears that having regard to the use to which they are put and the purpose of such use, they are indeed not agricultural.

44. In 'Commissioner of Wealth Tax, Andhra Pradesh v. Officer-in-Charge (Court of Wards) Paigah MANU/SC/0232/1976 : (1976) 3 SCC 864, this Court interpreted the definition of the term 'Agricultural Land' with respect to Section 2(e) of the Wealth Tax Act, 1957 that excluded the said term from the definition of assets. This Court observed:

We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of "assets", but its actual condition and intended user which has to be seen for purposes of exemption from wealth-tax. One of the objects of the exemption seemed to be to encourage cultivation or actual utilisation of land for agricultural purposes. If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be "agricultural land" for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence.

Similarly, in the case of Kunjukutty Saheb v. State of Kerala MANU/SC/0634/1972 : (1972) 2 SCC 364, this Court held as follows:

We suppose that something or other can be, and often is, grown on any vacant land, but that would not necessarily make it agricultural land for our purposes. To give an example the possibility of cultivating, or even the actual cultivation of, what is essentially a building site in the heart of a town would not make it agricultural land. It is the purpose for which it is held that determines its character and the existence of a few coconut trees or a vegetable patch on the land cannot alter the fact that it is held for purposes of building and not for purposes of agriculture.

In any event, having regard to the character of the land and the purpose for which it is set apart, we are of the view that the land in question is not an agricultural land. The High Court mis-directed itself in holding that the land was an agricultural land merely because it stood as such in the revenue entries, even though the application made for such conversation lies pending till date.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 2928-2930 of 2018 

Decided On: 19.03.2018

 ITC Limited Vs.  Blue Coast Hotels Ltd. and Ors.

Hon'ble Judges/Coram:

S.A. Bobde and L. Nageswara Rao, JJ.

Citation: 2018(6) MHLJ 42

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Precaution to be taken by small cause court while granting injunction

Notwithstanding the above and without disclosing the aforesaid facts,
Litesh and Parul have filed Declaratory suits in the Small Causes Court
(Bandra Branch) in collusion with the Valias and have obtained Interim
Orders on 7 March 2017. We have no manner of doubt that the said
Declaratory suits filed in the Small Causes Court (Bandra Branch) are
collusive suits filed by Litesh and Parul on the one hand and Valias on the
other hand and filed merely to obstruct and delay the taking over physical
possession of the said flats which are secured assets of the Petitioner Bank.
We are of the prima-facie view that the said Litesh & Parul on the one hand
and the Valias on the other hand have practiced fraud upon the Small
Causes Court (Bandra Branch). Apart from appropriate action in Contempt,
if any, they would have to satisfy the Court why the impugned order should
not be set aside in these proceedings in view of the judgment in the case of
S.P. Chengal Varaya Naidu (dead) by LRS vs. Jagannath (dead) by LRS,
(1994) 1 SCC 1, wherein it was held:
“Fraud avoids all judicial acts, ecclesiastical or temporal” observed Chief
Justice Edward Coke of England about three centuries ago. It is the settled
proposition of law that a judgment or decree obtained by playing fraud on the court
is a nullity and non est in the eyes of law. Such a judgment/decree-by the first court
or by the highest court has to be treated as a nullity by every court, whether
superior or inferior. It can be challenged in any court even in collateral
proceedings.”

9. We have come across such suits dime and dozen times. What however
is disturbing in the present case is the causal manner in which interim
injunctions are granted in both the suits making the provisions of the
SARFAESI Act nugatory. It appears that the interim injunctions are granted
even without reading the prayers in the Application for Interim Relief. The
prayers in the Applications for interim reliefs mischievously incorporate the
words “their creditors” and the interim injunctions in both the Applications in
the two suits are granted in the following terms:
“ORDER
1. …
2. The defendants, their creditors, servants, agents or other disgruntle elements are
hereby restrained by and order of temporary injunction from dispossessing the plaintiff from
the suit premises pending the hearing and final disposal of the suit”
(emphasis supplied)
The ‘creditors’ (the Petitioner Bank in the present case), have for obvious
reasons not been made parties in the Small Causes Court suits and interim
injunctions have been obtained behind their back and without disclosing all
facts, to obstruct and delay the taking over of physical possession of the
said flats which are secured assets of the Petitioner Bank as indicated
earlier. The grant of such blanket injunctions sets at nought the entire object
for which the SARFAESI Act was enacted.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION (ST.) NO. 17974 OF 2018
WITH
WRIT PETITION (ST.) NO. 17978 OF 2018

Central Bank of India V/s. M/s. VHCL Industries Ltd. & Ors.

CORAM : A.A. SAYED AND
V.L. ACHLIYA, JJ.
DATE : 3rd JULY, 2018.

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