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W.P. (C) No. 14496 of 2008. Case: N. P. Pushpangadan and Ors. Vs The Federal Bank Ltd. and Ors.. High Court of Kerala (India)

Judgment Cited authorities 2 Cited in 2 Precedent Map Related
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Case NumberW.P. (C) No. 14496 of 2008
CounselFor Petitioner: Jawahar Jose, Adv and For Respondents: Mohan Jacob George, Smt. P. V. Parvathi, Smt. Reena Thomas, L. Ram Mohan, A. Krishnan, Grashious Kuriakose, B. Pramod, T. K. Vipindas, Smt. P. K. Priya, K. M. Hashir, K. V. Sree Vinayakan, Advs.
JudgesJ. Chelameswar, K.T. Sankaran and P.N. Ravindran, JJ.
IssueSecuritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Sections 2, 13, 13(1), 13(2), 13(4), 13(6), 14, 17, 17(1), 17(3), 31, 34, 37, 35; Kerala Buildings (Lease and Rent Control) Act, 1965 - Sections 11, 11(4), 25; Transfer of Property Act, 1882 - Sections 8, 48, 69, 69A, 106, 109; State Financial...
Citation2011 (4) KLT 134, AIR 2012 Ker 27, 2012 (II) BC 115, 2011 (4) RCR 804 (Civil), 2011 (2) RCR 370 (Rent)
Judgement DateSeptember 23, 2011
CourtHigh Court of Kerala (India)

Judgment:

K.T. Sankaran, J., (Full Bench)

When this Writ Petition along with another Writ Petition came up for hearing before another Bench of this Court, the following question so flaw were framed for consideration:

(i) Whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'Securitisation Act') has an overriding effect over the provisions of the Kerala Buildings (Lease and Rent Control) Act, 1965? and

(ii) Whether a tenant under the provisions of the Kerala Buildings (Lease and Rent Control) Act of a premise which is the subject matter of securitisation proceedings can be summarily evicted under Sections 13 (4) and 14 of the Securitisation Act irrespective of the protection available to him under the Rent Control Act?

2. According to the petitioners, they are tenants in a line building consisting of six rooms in Ward No. 13 of Cherthala Municipality, The building belonged to the predecessor in interest of respondents 2 to 4. The second respondent availed a loan from the first respondent Bank in the year 2004. It is stated that respondents 2 to 4 have created security interest over the property as collateral security for the loan availed from the Bank. The loan was classified as non-perfoming assets (NPA) and the first respondent Bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the Securitisation Act"). The Bank filed a petition under S. 14 of the Securitisation Act before the Court of the Chief Judicial Magistrate, Alappuzha, who passed an order to take possession of the property. A Commissioner was appointed for that purpose. The Commissioner issued Ext. Pl notice to the tenants in the building stating that he would visit the property on 9.5.2008 to take possession. The tenants were directed to give vacant possession.

3. According to the petitioners, they are tenants in the building and they are entitled to protection from eviction under the provisions of the Kerala Buildings (Lease and Rent Control) Act, 1965 (hereinafter referred to as "the Rent Control Act") and also under the Transfer of Property Act. It is stated that the father of the first petitioner had taken a building in the property on lease, about seventy years back, from the original landlord. Later, the property was purchased by the predecessor in interest of respondents 2 to 4. The landlord filed a petition under S. 11 (4)(iv) of the Rent Control Act, on the ground of reconstruction of the building. That petition was allowed and the present building with six rooms was reconstructed in the year 1986. The first petitioner was inducted in 1986 on a monthly rental of ` 150/-, which was subsequently enhanced to ` 400/-. The first petitioner is conducting a bakery and tea stall in the building. The second petitioner is a tenant in respect of another room since 1991 and he is conducting a photo studio on a rental of ` 300/-, which was subsequently enhanced to ` 500/-. The third petitioner took on lease another room in the line building in 1996 and he is conducting a watch repair shop on a rental of ` 300/-, which was subsequently enhanced to ` 500/-. The fourth petitioner is a tenant in respect of another room since 1988 on a rental of ` 300/-, which was subsequently enhanced to ` 500/-. He is conducting a store under the name and style "Anitha Lady Store" in that room. The fifth petitioner took the room on rent in 1986 and he is conducting a medical store under the name and style "Rasheed Medicals" on a rental of ` 350/-, which was subsequently enhanced to ` 500/-. The sixth petitioner took the southernmost room from respondents 2 to 4 in the year 2000 and he is conducting a tailoring shop therein. Exts. P2 to P14 documents were produced by the petitioners to prove that they are tenants in the building. They contended that no notice was issued to them in any proceeding except the notice issued by the Commissioner.

4. According to the petitioners, since they were tenants at the time of creation of the mortgage, their tenancy right would not be affected by any of the measures taken under S. 13 (4) of the Securitisation Act. The leasehold right of the petitioners was not terminated in accordance with law and it could be terminated only by an order of eviction under the provisions of the Rent Control Act. The prayer in the Writ Petition is to quash Ext. P1 notice by the issue of a writ of certiorari and to declare that the secured creditor having not obtained the leasehold right, the petitioners are not liable to be evicted by the secured creditor without recourse to the due process of law.

5. In the counter affidavit, the first respondent contended as follows: The writ petitioners are set up by respondents 2 to 4 to delay the proceedings under the Securitisation Act. Respondents 2 to 4 filed W.P. (C) No. 31273 of 2006 challenging the notice issued for taking possession and the notice issued for sale under S. 13(4) of the Securitisation Act The writ petitioners therein undertook to settle the liability to the bank. An interim order of stay was passed on 24.11.2006. The interim order was later extended by six months on condition that the writ petitioners therein should deposit ` 2.5 lakhs per month commencing from March, 2007. It was held that in case of default, the interim order would stand vacated. Respondents 2 to 4 (writ petitioners in W.P. (C) No. 31273 of 2006) committed default. They also moved the Debts Recovery Tribunal in Securitisation Application No. 33 of 2007. That application was disposed of by Ext. R1 (c) order dated 12.6.2007 granting time to the applicants till 26.10.2007 to settle the liability. Confirmation of sale was stayed till 26.10.2007. Respondents 2 to 4 did not settle the liability as agreed. Instead, they filed W.P. (C) No. 31708 of 2007 seeking enlargement of time. The said Writ Petition was dismissed on 25.10.2007 (Ext. R1(d)). Respondents 2 to 4 challenged the judgment of the learned single Judge in W.A. No. 2587 of 2007, which was disposed of by Ext. R1 (e) judgment dated 26.2.2008 granting two more months' time to respondents 2 to 4 herein to settle the entire liability to the bank. The defaulters having failed in all their attempts to protract the proceedings under the Securitisation Act, they have now set up the petitioners to further delay the matter. The first respondent contended that the petitioners were inducted only after creation of mortgage in favour of the bank and even after sale of the property to the fifth respondent. It was contended that the notice under S. 13(4) was affixed in the property and it was also published in the newspapers. It was further contended that before the sale also, notice was published in two newspapers. The remedy of the petitioners, if any, is to file an appeal under S. 17(1) of the Securitisation Act. It is also contended that the documents produced by the writ petitioners are fabricated.

6. The first respondent also contended that the provisions of the Securitisation Act have overriding effect over the provisions of the Rent Control Act and the Transfer of Property Act.

7. On a consideration of the facts and circumstances of the case, we are not inclined to hold, prima facie, that the writ petitioners were inducted into possession of the building after creation of the mortgage in favour of the bank. The documents produced by the petitioners, prima facie, indicate that they were tenants in the buildings even before the date of creation of the mortgage in favour of the bank in 2001.

8. The Securitisation Act defines the terms "secured asset", "secured debt" and "secured interest" in Sections 2(zc), 2(ze) and 2(zf) as follows:

2. Definitions:- (1) In this Act, unless the context otherwise requires,--

(zc) "secured asset" means the property on which security interest is created;

(zd)..........

(ze) "secured debt" means a debt which is secured by any security interest;

(zf) "security interest" means right, title and interest of any kind whatsoever upon property, created in favour or any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in Section 31;

Section 31 states that the provisions of the Act shall not apply to the categories of cases mentioned in clauses (a) to (j) therein.

9. It is apposite to extract the relevant portions of Sections 13 and 14 of the Securitisation Act. They are:

13. Enforcement of security interest:-

(1) Notwithstanding anything contained in Section 69 or Section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).

(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not...

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