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[Sec 14 SARFAESI] If a tenant claims protection from taking possession of a Secured Asset, in a tenancy of more than a year, it can only by a registered instrument; Supreme Court

The SC on August 17, 2021 {HEMRAJ RATNAKAR SALIAN vs. HDFC BANK LTD. & ORS.} held that Section 17 of SARFAESI Act  has   been   amended  providing for challenging the measures to recover secured debts and under the Amendment, possession can be restored to the borrower or such other aggrieved person, which Amendment has come into force w.e.f. 1st September, 2016.

It was observed by the Bench, comprising of  Justice S.Abdul Nazeer & Justice Krishna Murari that this Court earlier in Harshad   Govardhan   Sondagar   v.   International   Asset Reconstruction Co. Ltd. & Ors. (2014) 6 SCC 1 has held that right of appeal is available to the tenant claiming under the borrower. Further, in Kanaiyalal Lalchand Sachdev v. State of Maharashtra (2011) 2 SCC 782 this Court has held that DRT can not only set aside the action of the secured creditor but even restore the status quo ante. It was further observed that 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 also observed that a Three­Judge Bench of this Court in Bajarang Shyamsunder Agarwal v. Central Bank of India & Anr., (2019) 9 SCC 94 after considering almost all decisions of this Court, in relation to the right of a tenant in possession of the secured asset, has held that if a valid tenancy under law is in existence even prior to the creation of the mortgage, such   tenant’s   possession   cannot   be   disturbed   by   the   secured creditor by taking possession of the property. However, it was held that If a tenancy under law comes into existence after the creation of a mortgage but prior to issuance of a notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65­A of the Transfer of Property   Act,   1882. It was also held that 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, and it was further 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.

The SC held that in the present case, first of all there is a serious doubt as to the bonafide of   the   tenant,   as   there   is   no   good   or   sufficient evidence to establish the tenancy of the appellant. It was held that the appellant has pleaded tenancy from 12.06.2012 to 17.12.2018 which is not supported by any registered instrument. Further, it was held that even according to the appellant, he is a “tenant­-in-­sufferance”, therefore, he is not entitled to any protection of the Rent Act. Secondly, it was held that 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.

In view of above, the appeals were dismissed by the SC.

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