Criminal Appeal No. 52 of 2016 (Arising out of SLP (Crl.) No. 8060 of 2015), Criminal Appeal No. 53 of 2016 (Arising out of SLP (Crl) No. 8064 of 2015), Criminal Appeal No. 54 of 2016 (Arising out of SLP (Crl) No. 8063 of 2015), Criminal Appeal No. 55 of 2016 (Arising out of SLP (Crl) No. 8062 of 2015), Criminal Appeal No. 56 of 2016 (Arising.... Case: Vishal N. Kalsaria Vs Bank of India and Ors.. Supreme Court (India)
| Case Number | Criminal Appeal No. 52 of 2016 (Arising out of SLP (Crl.) No. 8060 of 2015), Criminal Appeal No. 53 of 2016 (Arising out of SLP (Crl) No. 8064 of 2015), Criminal Appeal No. 54 of 2016 (Arising out of SLP (Crl) No. 8063 of 2015), Criminal Appeal No. 55 of 2016 (Arising out of SLP (Crl) No. 8062 of 2015), Criminal Appeal No. 56 of 2016 (Arising... |
| Counsel | For Appellant: Basava Prabhu S. Patil, Sr. Adv., Nikhil Goel, Naveen Goel, Purvish Jitendra Malkan, Dharita P. Malkan, Garvesh Kabra, H.C. Kharbanda, Anurag Kishore, Adarsh Upadhyay and Pramod B. Agarwala, Advs. and For Respondents: Dhruv Mehta, Amarendra Sharan, Vikas Singh, Shyam Diwan, Sr. Advs., Sameer Abhyankar, Sonal Jain, Heena Sharma, ... |
| Judges | V. Gopala Gowda and Amitava Roy, JJ. |
| Issue | The Maharashtra Rent Control Act, 1999 - Sections 15, 33, 38C; The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Sections 13, 13(1), 13(2), 13(4), 13(6), 14, 14(1), 17, 17(1), 17(3), 35, 55(2); Bombay Rent Act, 1947; Transfer of Property Act, 1882 - Sections 4, 69, 65A, 69A, 111, 105, 106... |
| Citation | 2016 (3) SCC 762, 226 (2016) DLT474 (SC), 2016 (1) SCALE 472 |
| Judgement Date | January 20, 2016 |
| Court | Supreme Court (India) |
Judgment:
V. Gopala Gowda, J.
1. The applications for impleadment are allowed.
2. Leave granted in all the special leave petitions.
3. In the present batch of appeals, the broad point which requires our attention and consideration is whether a 'protected tenant' under The Maharashtra Rent Control Act, 1999 (in short the 'Rent Control Act') can be treated as a lessee, and whether the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short, the 'SARFAESI Act') will override the provisions of the Rent Control Act. How can the right of the 'protected tenant' be preserved in cases where the debtor-landlord secures a loan by offering the very same property as a security interest either to Banks or Financial Institutions, is also the essential legal question to be decided by us.
4. In all the appeals, the same question of law would arise for consideration. For the sake of convenience and brevity, we would refer to the relevant facts from the appeal arising out of S.L.P. (Crl.) No. 8060 of 2015, which has been filed against the impugned judgment and order dated 29.11.2014 in M.A. No. 123 of 2011 in Case No. 237 of 2010 passed by the learned Chief Metropolitan Magistrate, Esplanade, Mumbai, wherein the application of the Appellant herein for impleadment as intervenor as well as stay of the order dated 08.04.2011 passed in Case No. 237 of 2010 by the learned Magistrate, Esplanade, Mumbai, was dismissed.
5. Respondent Nos. 4 and 5 had approached the Bank of India (Respondent No. 1) (in short "the Respondent Bank") for a financial loan, which was granted against equitable mortgage of several properties belonging to them, including the property in which the Appellant is allegedly a tenant. The Respondent Nos. 4 and 5 failed to pay the dues within the stipulated time and thus, in terms of the SARFAESI Act, their account became a non-performing asset. On 12.03.2010, the Respondent-Bank served on them notice Under Section 13(2) of SARFAESI Act. On failure of the Respondents to clear the dues from the loan amount borrowed by the above Respondent Nos. 4 and 5 within the stipulated statutory period of 60 days, the Respondent-Bank filed an application before the Chief Metropolitan Magistrate, Mumbai Under Section 14 of the SARFAESI Act for seeking possession of the mortgaged properties which are in actual possession of the Appellant. The learned Chief Metropolitan Magistrate allowed the application filed by the Respondent-Bank vide order dated 08.04.2011 and directed the Assistant Registrar, Borivali Centre of Courts to take possession of the secured assets. On 26.05.2011, the Respondent No. 4 served a notice on the Appellant, asking him to vacate the premises in which he was residing within 12 days from the receipt of the notice. The Appellant fearing eviction, filed a Rent Suit R.A.D. Suit No. 913 of 2011 before the Court of Small Causes, Bombay. Vide order dated 08.06.2011, the Small Causes Court allowed the application and passed an ad interim order of injunction in favour of the Appellant, restraining Respondent No. 4 from obstructing the possession of the Appellant over the suit premises during the pendency of the suit. In view of the order dated 08.06.2011, the Appellant then filed an application as an intervenor to stay the execution of the order dated 08.04.2011 passed by the Chief Metropolitan Magistrate. The learned Chief Metropolitan Magistrate vide order dated 29.11.2014 dismissed the application filed by the Appellant by placing reliance on a judgment of this Court rendered in the case of Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. and Ors. (2014) 6 SCC 1. Dismissing the application, the learned judge held as under:
3....the Hon'ble Supreme Court has held that the alleged tenant has to produce proof of execution of a registered instrument in his favour by the lessor. Where he does not produce proof of execution of a registered instrument in his favour and instead relies on an unregistered instrument or oral agreement accompanied by delivery of possession, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, will have to come to the conclusion that he is not entitled to the possession of the secured asset for more than a year from the date of the instrument or from the date of delivery of possession in his favour by the landlord.
4. It is to be highlighted that the intervener did not place on record any registered instrument to fulcrum his contention. So, in view of the ratio laid down in Harshad Sondagar's case (cited supra), I hold that the intervener is not entitled to any protection under the law.
6. The learned Chief Metropolitan Magistrate further held that when the secured creditor takes action Under Section 13 or 14 of the SARFAESI Act to recover the possession of the secured interest and recover the loan amount by selling the same in public auction, then it is not open for the Court to grant an injunction Under Section 33 of the Rent Control Act. The learned Chief Metropolitan Magistrate further held that the order dated 08.06.2011 passed by the Small Causes Court, Mumbai cannot be said to be binding upon the Respondent-Bank, especially in the light of the fact that it was not a party to the proceedings. Hence the present appeal filed by the Appellant.
7. We have heard the learned Counsel for both the parties.
8. Before we consider the submissions advanced by the learned Counsel appearing on behalf of the parties, it is essential to first appreciate the provisions of law in question.
9. The Maharashtra Rent Control Act, 1999, which repealed the Bombay Rent Act, 1947 was enacted by the state legislature of Maharashtra under Entry 18 of List II of the Seventh Schedule of the Constitution of India to consolidate and unify the different provisions and legislations in the State which existed pertaining to rent and the landlord-tenant relationship. The Statement of objects and reasons of the Rent Control Act reads, inter alia, as under:
1...At present, there are three different rent control laws, which are in operation in this State.... All these three laws have different provisions and the courts or authorities which have the jurisdiction to decide matters arising out of these laws are also not uniform. The Procedures under all the three laws are also different in many of the material aspect.
2. Many features of the rent control laws have outlived their utility. The task, therefore, of unifying, consolidating and amending the rent control laws in the State and to bring the rent control legislation in tune with the changed circumstances now, had been engaging the attention of the Government......
3. In the meantime, the Central Government announced the national housing policy which recommends, inter alia, to carry out suitable amendments to the existing rent control laws for creating and enabling involvement in housing activity and for guaranteeing access to shelter for the poor. The National Housing Policy further recognized the important role of rental housing in urban areas in different income groups and low-income households in particular who cannot afford ownership house. The existing rent control legislation has resulted in a freeze of rent, very low returns in investment and difficulty in resuming possession and has adversely affected investment in rental housing and cause deterioration of the rental housing stock.
On the other hand, the SARFAESI Act was enacted by the Parliament with a view to regulate the securitisation and reconstruction of financial assets and enforcement of security interests against the debtor by securing the possession of such secured assets and recover the loan amount due to the Banks and Financial Institutions. The statement of objects and reasons of the SARFAESI Act reads as under:
The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating Securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas.
(Emphasis laid by this Court)
10. The SARFAESI Act enacted under List I of the Constitution of India thus, seeks to regulate asset recovery by the Banks. It becomes clear from a perusal of the Statements of Objects and Reasons of the Rent Control Act and the SARFAESI Act that the two Acts are meant to operate in completely different spheres. So far as residential tenancy rights are concerned, they are governed by the provisions of the Rent Control Act which occupies the field on the subject.
11. The controversy in the instant case arises squarely out of the interpretation of a decision of this Court in the case of Harshad Govardhan Sondagar (supra). The fact situation facing the court in that case was similar to the one in the instant case. The premises which the Appellants therein claimed to be the tenants of had been mortgaged to different banks as...
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