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Saturday, February 20, 2016

whether the so called agreement to sell dated 6.1.1995, which is extracted hereinbelow, is enforceable in law for passing a decree for specific performance of contract. The said agreement reads as under :- ”RECEIPT + AGREEMENT DATED 6.1.1995= In the instant case both the Trial Court and the High Court have completely overlooked and failed to appreciate the following facts:- (a) The receipt + agreement dated 6.1.1995 is a document by which the defendant alleged to have received a sum of Rs.2,30,000/- against the alternative plot in question which the DDA recommended to give to the defendant. The said plot will in turn will be given by the defendant to the plaintiff after a lease was executed in favour of the defendant by the DDA; (b) The total premium amount settled by the said agreement in respect of the plot was Rs.4,60,000/- whereas the defendant deposited a sum of Rs.8,13,389/- with the DDA for the allotment of the said plot; (c) The plaintiff pleaded in his plaint that the defendant had agreed to sell his rights in the recommendation letter and the plot to be allotted thereunder to the plaintiff for a consideration of Rs.4,60,000/-; (d) Although the right to get the plot was agreed to be sold to the plaintiff by the defendant for Rs.4,60,000/- but the suit was valued at Rs. 6,77,262.75p. being the rate fixed by the DDA.-“It is stated on oath by Umed Singh (DW1) that the DDA allotted plot in dispute to his deceased father on certain terms and conditions, which were embodied in the lease deed. One of such conditions was that suit will remain non-transferable for a period of ten years.”- that the land so allotted to the defendant- is not transferable for a period of 10 years, the High Court failed to hold that a decree for specific performance cannot be passed. Consequently, we direct the appellant to refund a sum of Rs.4,30,000/- (Rupees Four Lakhs Thirty Thousand) which was paid by the respondents to the appellant together with interest @ 6% per annum from the date of such receipt within two months from today.

                                                                ‘REPORTABLE’

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 7385 OF 2013


Satish Kumar                                          ….Appellant(s)
                                   versus
Karan Singh and Another                              ….Respondent(s)

                               J U D G M E N T

M.Y. EQBAL, J.

            The question that needs consideration  in the instant appeal  is
as to whether the so called agreement  to  sell  dated  6.1.1995,  which  is
extracted hereinbelow, is enforceable  in  law  for  passing  a  decree  for
specific performance of contract.  The said agreement reads as under :-
”RECEIPT + AGREEMENT DATED 6.1.1995

Received a sum of amount Rs.2,30,000/-(Two Lac Thirty Thousand)  from  Karan
Singh S/o Sh. Basti Ram R/o Village and PO Mahipal Pur New Delhi-110 037  on
sixth    January,    1995    against    our     DDA     alternative     plot
F.No.32(5)113/87/L&B/Alt./2511 dated 11.8.1989 in the  name  of  Sh.  Jaishi
S/o Sh. Ram Saran R/o V&PO Mahipalpur New Delhi.   The  total  area  of  the
above said plot is 400 Sq.Yds.  The total  premium  settled  for  the  above
said plot is Rs.4,60,000/- (Four Lacs Sixty Thousand) will be given  at  the
time of receive the lease after  execution  at  the  Registrar  Office.   No
payment will be given in between.”
                                                                        Sd/-
                                                                   Jaisi Ram
In the presence of                      S/o Ram Saran
J.N. Sehrawat                       Village Mahipal Pur
V& PO Mahipal Pur
New Delhi-110037.

2.    The trial court after recording  the  evidence  decreed  the  suit  of
plaintiff-respondent for specific performance and  the  High  Court  by  the
impugned judgment dismissed the appeal filed by the appellant  and  affirmed
the decree passed by the Trial Court.

3.    We have heard learned counsel appearing for the parties.

4.    The plaintiff’s case in the plaint is that a  decision  was  taken  by
the Delhi Development Authority for allotment of a plot  of  land  measuring
400 Sq.yds. in favour of the defendant-respondent.  It was pleaded  that  in
the year 1995 the defendant had desired  to  sell  his  right  in  the  said
recommendation letter which was to be allotted by the DDA in favour  of  the
defendant.  It was further pleaded that the defendant  agreed  to  sell  his
right in the aforesaid recommendation letter and the plot to be allotted  at
a price of Rs.4,60,000/-.  For better appreciation para 6 of the  plaint  is
extracted hereinbelow :-

“6.  That the negotiations in between the parties had taken  place  and  the
plaintiff had agreed to purchase the said rights of  the  defendant  in  the
said recommendation letter  and  the  plot  to  be  allotted  thereto.   The
dealings were finalized and a Receipt-cum-Agreement  (for  short  Agreement)
was also executed in between the parties on January 6, 1995.

It is stated that the defendant  had  agreed  to  sell  his  rights  in  the
aforementioned recommendation letter and the plot to be allotted  thereunder
to the plaintiff for the sale consideration of  Rs.4,60,000/-  (Rupees  Four
lakhs and Sixty thousand only).  A sum of Rs.2,30,000/-  (Rupees  Two  Lakhs
and Thirty Thousand only) was also paid by the plaintiff  to  the  defendant
on January 6, 1995 itself.  Vide the said agreement dated January  6,  1995,
the defendant had acknowledged receipt of the sum  of Rs.2,30,000/-  (Rupees
Two Lakhs Thirty Thousand only) from the plaintiff.  It was  further  agreed
that the balance amount of Rs.2,30,000/- (Rupees Two Lakhs  Thirty  Thousand
only) would be paid by the plaintiff to the  defendant  when  the  defendant
hands over the original lease deed duly executed by  the  Delhi  Development
Authority in favour of the defendant.”

5.    Curiously enough although the total sale consideration fixed  was  Rs.
4,60,000/- but the suit was valued at Rs.6,77,262.75p. on the basis  of  the
value fixed by the DDA in respect of the plot in question.

6.    During the pendency of the  suit  in  the  trial  court  the  original
defendant who was an old  person  died  and  his  legal  representative  was
substituted.  The  original  defendant  as  also  the  legal  representative
contested the suit denying and disputing the  alleged  receipt-cum-agreement
and stated that no decree for  specific  performance  can  be  passed.   The
trial court held  that  the  receipt-cum-agreement  is  a  legal  and  valid
agreement to sell and shall be enforced by passing  a  decree  for  specific
performance.  The High Court  on  the  basis  of  evidence  adduced  by  the
parties affirmed the finding recorded by the trial court.

7.    Prima facie, we are of the view that both  the  trial  court  and  the
High Court have completely failed to consider  the  provisions  of  Specific
Relief Act and  the  principles  laid  down  by  this  Court  in  catena  of
decisions as to the requirement of law for  passing a  decree  for  specific
performance.

8.     It  is  well  settled  that  the  jurisdiction  to   order   specific
performance  of  contract  is  based  on  the  existence  of  a  valid   and
enforceable contract.  Where a valid and enforceable contract has  not  been
made, the Court will not make a contract  for  them.   Specific  performance
will not be ordered if the contract itself suffers from  some  defect  which
makes the contract invalid or unenforceable.  The discretion  of  the  Court
will  not  be  there  even  though  the  contract  is  otherwise  valid  and
enforceable.

9.    This Court in Mayawanti  vs.  Kaushalya Devi   (1990)  3  SCC  1  held
thus:-

“8. In a case of specific performance it  is  settled  law,  and  indeed  it
cannot be doubted, that the jurisdiction to order specific performance of  a
contract is based on the existence of a valid and enforceable contract.  The
Law of Contract is based  on  the  ideal  of  freedom  of  contract  and  it
provides the limiting principles within which the parties are free  to  make
their own contracts. Where a valid and enforceable  contract  has  not  been
made, the court will not make a  contract  for  them.  Specific  performance
will not be ordered if the contract itself suffers from  some  defect  which
makes the contract invalid or unenforceable. The  discretion  of  the  court
will be there even though the contract is otherwise  valid  and  enforceable
and it can pass a decree of specific performance even before there has  been
any breach of the  contract.  It  is,  therefore,  necessary  first  to  see
whether there has been a valid and enforceable contract and then to see  the
nature and obligation arising out of it. The contract being  the  foundation
of the obligation the order of  specific  performance  is  to  enforce  that
obligation.”

10.   Exercise of discretionary power  under  Section  20  of  the  Specific
Relief Act for granting a decree, this  Court  in  the  case  of  Parakunnan
Veetill Joseph’s Son Mathew  vs.  Nedumbara Kuruivila’s Son and others,  AIR
1987 SC 2328  observed:-
“14. Section  20  of  the  Specific  Relief  Act,  1963  preserves  judicial
discretion of courts as to decreeing specific performance. The court  should
meticulously consider all facts and circumstances of the case. The court  is
not bound to grant specific performance merely because it is  lawful  to  do
so. The motive behind the litigation should also  enter  into  the  judicial
verdict. The court should take care to  see  that  it  is  not  used  as  an
instrument of oppression to have an unfair advantage to the  plaintiff.  The
High Court has failed to consider the motive with which Varghese  instituted
the suit. It was instituted because Kuruvila could not get  the  estate  and
Mathew was not prepared to part with it. The sheet anchor  of  the  suit  by
Varghese is the agreement for sale Exhibit A-1. Since  Chettiar  had  waived
his rights thereunder, Varghese as an assignee could not get a better  right
to enforce that agreement. He is, therefore, not entitled to  a  decree  for
specific performance.”

11.   In the instant case both the Trial  Court  and  the  High  Court  have
completely overlooked and failed to appreciate the following facts:-
(a)   The receipt + agreement dated 6.1.1995 is  a  document  by  which  the
defendant alleged to have  received  a  sum  of  Rs.2,30,000/-  against  the
alternative plot in question which  the  DDA  recommended  to  give  to  the
defendant.  The said plot will in turn will be given  by  the  defendant  to
the plaintiff after a lease was executed in favour of the defendant  by  the
DDA;

(b)   The total premium amount settled by the said agreement in  respect  of
the plot  was  Rs.4,60,000/-  whereas  the  defendant  deposited  a  sum  of
Rs.8,13,389/-  with the DDA for the allotment of the said plot;

(c)     The plaintiff pleaded in his plaint that the  defendant  had  agreed
to sell his rights in the recommendation letter and the plot to be  allotted
thereunder to the plaintiff for a consideration of Rs.4,60,000/-;

(d)   Although the right to get the plot  was  agreed  to  be  sold  to  the
plaintiff by the defendant for Rs.4,60,000/- but the suit was valued at  Rs.
6,77,262.75p. being the rate fixed by the DDA.

12.   On the basis of these admitted facts the Trial Court erroneously  held
that the receipt-cum-agreement  is  an  enforceable  contract  and  on  that
finding decreed the suit which was affirmed by the High Court.
13.   It is interesting to note that the High Court  has  noticed  the  fact
mentioned in para 24 of trial court judgment that  during  the  pendency  of
the lis DDA allotted the plot in question in favour of the  deceased  father
of the defendant (original plaintiff) by executing a lease  deed  putting  a
condition that the plot in  question  will  remain  non-transferable  for  a
period of ten years.   Para  24  of  the  trial  court  judgment  is  quoted
hereinbelow:-
“It is stated on oath by Umed Singh (DW1) that  the  DDA  allotted  plot  in
dispute to his deceased father on certain terms and conditions,  which  were
embodied in the lease deed.  One of  such  conditions  was  that  suit  will
remain non-transferable for a period of ten  years.”

14.   In spite of the aforesaid fact noticed by the  High  Court,  that  the
land so allotted to the defendant- is not transferable for a  period  of  10
years, the High Court failed to hold that a decree for specific  performance
cannot be passed.
15.   We are sorry to hold that both the Trial  Court  and  the  High  Court
have completely misconstrued the facts of the  case  and  misunderstood  the
law laid down by this Court in the matter of exercising discretionary  power
for granting a decree for specific performance.
16.   After giving our anxious consideration to the matter, we  are  of  the
view that the impugned order passed by the trial court and affirmed  by  the
High Court cannot be sustained in law inasmuch as no   decree  for  specific
performance  can  be  passed  on  the  basis  of  the  alleged  receipt-cum-
agreement. We therefore, allow this  appeal  and  set  aside  the  judgments
passed by the Trial Court and the High Court.
17.   Consequently, we direct the appellant to refund a sum of Rs.4,30,000/-
 (Rupees Four Lakhs Thirty Thousand) which was paid by  the  respondents  to
the appellant together with interest @ 6% per annum from the  date  of  such
receipt  within  two  months  from  today.  Any  amount  deposited  by   the
respondents in the High Court shall be withdrawn by them.

                                                              …………………………….J.
                                                                (M.Y. Eqbal)




                                                              …………………………….J.
                                                               (Arun Mishra)
New Delhi
January 21, 2016

Thursday, February 18, 2016

starting point of limitation for redemption of usufructuary mortgage should run from the date the mortgage money is paid or is otherwise satisfied.= question of limitation on redemption of usufructuary mortgage, the High Court has placed reliance on Sampuran Singh & Others Vs. Niranjan Kaur & Others reported in (1999) 2 SCC 679 and Prabhakaran & Others Vs. M. Azhagiri Pillai reported in (2006) 4 SCC 484. The position taken by the High Court in those decisions has been held to be no more good law in Singh Ram Vs. Sheo Ram and Others reported in (2014) 9 SCC 185 wherein it has been held that the starting point of limitation for redemption of usufructuary mortgage should run from the date the mortgage money is paid or is otherwise satisfied.



                                                              NON-REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                      CIVIL APPEAL NOS. 788-789 OF 2016
              (Arising out of SLP (C) Nos. 31469-31470 of 2014)



      MOHAN LAL                                         APPELLANT

                                VERSUS

      MOHAN LAL & ORS                               RESPONDENTS


                               J U D G M E N T


      KURIAN,J.

1.    Leave granted.

2.    The appellant is aggrieved by the  impugned  orders  dated  25.07.2013
and 18.12.2013 passed by the High  Court  of  Judicature  for  Rajasthan  at
Jodhpur.  The application filed by the respondent under Order VII,  Rule  11
(d) CPC in Suit No. 219/2004 on the file of Civil  Judge,  Junior  Division,
Jodhpur was allowed.
3.    On the question of limitation on redemption of usufructuary  mortgage,
the High Court has placed reliance on Sampuran Singh & Others  Vs.  Niranjan
Kaur & Others reported in (1999) 2 SCC 679 and Prabhakaran & Others  Vs.  M.
Azhagiri Pillai reported in (2006) 4 SCC 484.  The  position  taken  by  the
High Court in those decisions  has been held to  be  no  more  good  law  in
Singh Ram Vs. Sheo Ram and Others reported in (2014) 9 SCC  185  wherein  it
has been held that the  starting  point  of  limitation  for  redemption  of
usufructuary mortgage should run from the date the mortgage  money  is  paid
or is otherwise satisfied.

4.    In that view of the matter, the impugned judgments of the  High  Court
are set aside.  The matters are remitted  to  the  Trial  Court.   The  suit
shall be tried on all issues raised for trial.  Being a  suit  of  the  year
2004, we request the Trial Court to dispose of the suit  within  six  months
from the date of next appearance of the parties.  The parties  shall  appear
before the Trial Court on 4th April, 2016.

5.    The appeals are allowed as above with no order as to costs.


                                             .....................J.
                                             [KURIAN JOSEPH]



                                            ....................J.
                                            [ROHINTON FALI NARIMAN

      NEW DELHI;
      JANUARY 29, 2016


Whether Late Azimuddin on 24.2.76 made a valid gift of 1/3 undivided share in the disputed property in favour of the plaintiffs and was receiving the rent from tenants in his lifetime till 1.1.77 and was paying 1/3 part of it to the plaintiffs? =Validity of gift deed dated 24th February, 1976 executed by late Hazi Azimuddin in favour of the plaintiff Rafiuddin is the sole question for consideration. The courts below have held the same to be a gift of undivided share of property which was capable of division and thus invalid under Muslim Law being hiba-bil-musha. It has also been held that gift was of no effect as possession was not delivered to the donee. Factually, the gift was held to be genuinely executed. = Apex court held The gift is valid = while gift of immovable property is not complete unless the donor parts with the possession and donee enters into possession but if the property is in occupation of tenants, gift can be completed by delivery of title deed or by request to tenants to attorn to the donee or by mutation. It is further clear that gift of property which is capable of division is irregular but can be perfected and rendered valid by subsequent partition or delivery. Exceptions to the rule are : where the gift is made by one co-heir to the other; where the gift is of share in a zemindari or taluka; where gift is of a share in freehold property in a large commercial town, and where gift is of share in a land company.= “Mulla Principles of Mohammedan Law, 20th Edition by Lexis Nexis, paras 152 and 160 which are : “152. Delivery of possession of immovable property (1) Where donor is in possession – A gift of immovable property of which the donor is in actual possession is not complete, unless the donor physically departs from the premises with all his goods and chattels, and the donee formally enters into possession. (2) Where property is in the occupation of tenants – A gift of immovable property which is in the occupation of tenants may be completed by a request by the donor to the tenants to attorn to the donee, or by delivery of the title deed or by mutation in the Revenue Register or the landlord’s sherista. But if the husband reserves to himself the right to receive rents during his lifetime and also undertakes to pay Municipal dues, a mere recital in the deed that delivery of possession has been given to the donee will not make the gift complete. (3) Where donor and donee both reside in the property – No physical departure or formal entry is necessary in the case of a gift of immovable property in which the donor and the donee are both residing at the time of the gift. In such a case the gift may be completed by some overt act by the donor indicating a clear intention on his part to transfer possession and to divest himself of all control over the subject of the gift. The principle for the determination of questions of this nature was thus stated by West, J. in a Bombay case. “When a person is present on the premises proposed to be delivered to him, a declaration of the person previously possessed puts him into possession without any physical departure or formal entry. 160. Gift of mushaa where property divisible. A gift of an undivided share (mushaa) in property which is capable of division is irregular (fasid), but not void (batil). The gift being irregular, and not void, it may be perfected and rendered valid by subsequent partition and delivery to the donee of the share given to him. If possession is once taken the gift is validated. Exceptions – A gift of an undivided share (mushaa), though it be a share in property capable of division, is valid from the moment of the gift, even if the share is not divided off and delivered to the donee, in the following cases – (1) where the gift is made by one co-heir to another. (2) where the gift is of a share in a zemindari or taluka (3) where the gift is of a share in freehold property in a large commercial town. (4) where the gift is of shares in a land company.”=Requirement of possession is also met when right to collect rent has been assigned to the plaintiff under the gift deed itself, genuineness of which stands proved.-The gift had no infirmity under the Muslim Law either on the ground that the possession was not delivered or on the ground that the gift was hit by Hiba-bil-Musha. The gift was by father to his minor son. Property is under tenancy. The gift is by a registered deed. Right to collect rent stands transferred to donee. The property is located in the city of Jaipur which is mentioned in Para 2 of the plaint as well as in the gift deed. The courts below are not justified in not giving effect to the gift which has been held to be genuine.

                                 REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                        CIVIL APPEAL NO.2845 OF 2006


KHURSIDA BEGUM (D) BY LRS. & ORS.          …APPELLANTS




                                   VERSUS


KOMAMMAD FAROOQ (D) BY LRS. & ANR.      ...RESPONDENTS



                               J U D G M E N T




ADARSH KUMAR GOEL, J.


1.    Validity of gift deed dated 24th February, 1976 executed by late  Hazi
Azimuddin in favour of the plaintiff Rafiuddin  is  the  sole  question  for
consideration.  The courts below  have  held  the  same  to  be  a  gift  of
undivided share of property which was capable of division and  thus  invalid
under Muslim Law being hiba-bil-musha.  It has also been held that gift  was
of no effect as possession was not delivered to the donee.   Factually,  the
gift was held to be genuinely executed.


2.    Facts are as follows : The appellant filed suit for  recovery  of  the
amount received by the defendants by way of rent to the extent of  one-third
share of the plaintiff (based on gift deed in his favour by his  father)  in
the property which was rented out to the tenants.  Claim  of  the  plaintiff
is that his father late Hazi Azimuddin was the absolute owner  of  the  suit
property.  In the sale deed, his father got  the  names  of  the  defendants
(brothers of the plaintiff) recorded as owners to the extent  of  two-third.
On 24th February, 1976, he gifted his one-third share to the plaintiff by  a
registered deed  and  informed  the  tenants.   After  the  gift  deed,  the
plaintiff was to get one-third share  of  the  rent.   The  total  rent  was
Rs.50/- per month.  From 1st January,  1977,  the  defendants  received  the
entire rent and did not  pay  the  plaintiff’s  share  to  him.   Thus,  the
plaintiff was entitled to recover one-third of the  amount  falling  to  his
share.


3.    The respondents defendants contested the suit denying the validity  of
the gift deed.   It  was  stated  that  Hazi  Azimuddin  was  95  years  old
suffering from certain ailments and was not in a fit condition to  make  the
gift deed.  He had no right in the property  and  had  never  recovered  any
part of the rent.  There was an oral  family  arrangement  under  which  the
defendants became the exclusive owners and Hazi Azimuddin  relinquished  all
his rights.


4.    The trial Court framed following issues :


1.    Whether the disputed property has come  to  the  defendants  20  years
prior to the institution of the suit  by  way  of  oral  family  arrangement
between late Azimuddin and the defendants and  they  are  in  possession  as
owners in their shares for 20 years?


2.    Whether Late Azimuddin on 24.2.76 made a valid gift of  1/3  undivided
share in  the  disputed  property  in  favour  of  the  plaintiffs  and  was
receiving the rent from tenants in his lifetime till 1.1.77 and  was  paying
1/3 part of it to the plaintiffs?


3.    Whether sufficient court fees has been paid?


4.    Whether  the  suit  is  for  partial  partition  of  the  property  of
Azimuddin.   If  yes,  then  whether  suit  for  partial  partition   cannot
continue?


5.    Whether the suit is barred by limitation?


6.    Whether the other sons and daughters of Azimudin are  necessary  party
to the suit.  If yes,  what  is  the  effect  of  non-joinder  of  necessary
parties to the suit?


7.    Relief.”

      The trial Court dismissed the  suit.   It  was  held  that  no  family
arrangement had taken place as claimed by the  defendants.   Hazi  Azimuddin
alone was receiving the rent from the tenants till his  death  as  shown  by
the rent receipts and other documents which were  proved  on  record.   Gift
deed dated 24th February, 1976 was duly executed.   Hazi  Azimuddin  himself
had gone to the office of the Sub Registrar.  The  case  of  the  defendants
that he was not in a fit state of health was not  accepted.   However,  gift
of undivided property was not valid as the plaintiff was never given  actual
or symbolic possession of one-third share of property and that the gift  was
hiba-bil-musha.  The High Court dismissed the appeal.
5.    We have heard learned counsel for the parties.
6.    Learned counsel for the appellants submitted that once  the  gift  was
held to have been duly proved in favour of  the  appellant  who  was  minor,
transfer of  possession  was  not  required  to  be  proved.   Further,  the
property being in possession of  the  tenant,  execution  of  gift  deed  by
itself amounted to transfer of  constructive  possession.   It  was  further
submitted that the gift could not have been declared invalid on  the  ground
that it related to undivided share of divisible property which was  not  the
plea in the written statement.  There was no  absolute  bar  to  such  gift.
Even if there is such a bar in certain situations, there are  exceptions  to
the rule which apply.  One of the exceptions is that  property  is  freehold
property in a large commercial town  which  is  clearly  applicable  to  the
present case.   The courts below thus  erred  in  holding  the  gift  to  be
illegal on that ground.
7.    Learned counsel for the respondents supported the impugned judgment.
8.    Before we advert to the issue, it will be appropriate to refer to  the
finding recorded by the courts below.  The trial court observed :

“Now, it only remains to be decided as to what is the  effect  of  the  said
gift-deed.  I have gone through Section  206  of  Muslim  Law  which  is  as
follows :

206.   Hiba of undivided property (hiba-bil-mushaa)

Subject to the provisions of Sec. 207  a  hiba  of  an  undivided  share  in
property which is capable of division is invalid  except  in  the  following
cases :

a.    Where it is made by one co-sharer in the property to another;
b.    Where the property admits of definite ascertainment of shares  and  is
capable of separate enjoyment without division;
c.    Where it is made to a minor who is under the custody of the donor  and
to whom the donor transfers a part of the property;
d.    Where the property is freehold property in  a  large  commercial  town
(c)

For Hiba-bil-Mushaa, it is settled principle of  Muslim  Law  that  gift  of
undivided share in property, which is capable of division is invalid  except
in 4 aforesaid cases.  In my view, this disputed Hiba does not fall  in  any
of above-stated exception and it can be said to be  invalid.   I  have  gone
through the  judgment  cited  by  the  Learned  Counsel  for  the  plaintiff
according to which even if the case is covered under exception “c” and  “d”,
even then it has to be said that handing over of possession is necessary  in
Hiba-bil-Mushaa.  If the possession has  not  been  handed  over,  then  the
principle of Musha would be applicable and  that  Hiba  will  be  considered
invalid.
xxxxxxx

The plaintiff has totally failed to prove that on  24.2.76  or  later,  they
had been handed over possession actual or symbolic of  undivided  1/3  share
of the property.  In  such  circumstances,  it  has  to  be  said  that  the
principle of Musha would be applicable to Hiba and Hiba that has  been  made
on 24.2.76 is not as per the rules and is invalid.  As  a  consequence  this
issue is decided against the plaintiff.”





9.    The High Court held :
“Bare reading of the above provision would show that the  gift  in  question
in the present case does not come in any of the exceptions mentioned  above.
 It has also not been pleaded or proved in any manner that the  property  in
question is freehold property in a large commercial town, so as  to  attract
clause (d) of the exception as referred to above.

After having considered the entire facts and circumstances  of  the  present
case, in view of the clear provisions of law, as referred to above,  I  find
no error or illegality in the judgment and decree passed by the trial  court
so as to call for any further interference of this court.”


10.   Learned counsel for the parties have referred  to  the  principles  of
Mohammedan Law as compiled in “Mulla  Principles  of  Mohammedan  Law,  20th
Edition by Lexis Nexis, paras 152 and 160 which are :
“152. Delivery of possession of immovable property (1)  Where  donor  is  in
possession – A gift of immovable property of which the donor  is  in  actual
possession is not complete, unless the donor  physically  departs  from  the
premises with all his goods and chattels,  and  the  donee  formally  enters
into possession.

(2)   Where property is in the occupation of tenants – A gift  of  immovable
property which is in the  occupation  of  tenants  may  be  completed  by  a
request by the donor to the tenants to attorn to the donee, or  by  delivery
of the title deed or by mutation in the Revenue Register or  the  landlord’s
sherista.  But if the husband reserves  to  himself  the  right  to  receive
rents during his lifetime and also undertakes to pay Municipal dues, a  mere
recital in the deed that delivery of possession has been given to the  donee
will not make the gift complete.

(3) Where donor and  donee  both  reside  in  the  property  –  No  physical
departure or formal entry is necessary in the case of a  gift  of  immovable
property in which the donor and the donee are both residing at the  time  of
the gift.  In such a case the gift may be completed by  some  overt  act  by
the donor indicating a clear intention on his part  to  transfer  possession
and to divest himself of all control over the  subject  of  the  gift.   The
principle for the determination of questions of this nature was thus  stated
by West, J. in a Bombay case.  “When a person is  present  on  the  premises
proposed to be delivered to him, a  declaration  of  the  person  previously
possessed puts him into possession without any physical departure or  formal
entry.

160.  Gift of mushaa where property  divisible.   A  gift  of  an  undivided
share (mushaa) in  property  which  is  capable  of  division  is  irregular
(fasid), but not void (batil).  The gift being irregular, and not  void,  it
may be perfected and rendered valid by subsequent partition and delivery  to
the donee of the share given to him.  If possession is once taken  the  gift
is validated.

Exceptions – A gift of an undivided share (mushaa), though it be a share  in
property capable of division, is valid from the moment of the gift, even  if
the share is not divided off and delivered to the donee,  in  the  following
cases –

(1)    where the gift is made by one co-heir to another.
(2)    where the gift is of a share in a zemindari or taluka
(3)    where the gift is of a share in freehold property  in  a        large
commercial town.
(4)    where the gift is of shares in a land company.”

11.   A perusal of the above shows that while gift of immovable property  is
not complete unless the donor parts with the  possession  and  donee  enters
into possession but if the property is in occupation of  tenants,  gift  can
be completed by delivery of title deed or by request to  tenants  to  attorn
to the donee or by mutation.  It is further  clear  that  gift  of  property
which is capable of division is irregular but can be perfected and  rendered
valid by subsequent partition or delivery. Exceptions  to  the  rule  are  :
where the gift is made by one co-heir to the other; where  the  gift  is  of
share in a zemindari or taluka;  where  gift  is  of  a  share  in  freehold
property in a large commercial town, and where gift is of share  in  a  land
company.
12.   The courts below appear  to  have  quoted  “Mohammedan  Law”  by  B.R.
Verma, Law Publishers (India) Pvt. Ltd, 13th Edition which is by  and  large
to same effect as Mulla’s book on the subject.
13.   The courts below have held the gift to be invalid on the  ground  that
it was gift of undivided property which is capable of division and  was  not
covered by any of the exceptions to the rule that gift of such  property  is
irregular.  It is submitted by learned counsel for the  appellant  that  the
property is freehold property in the  city  of  Jaipur,  which  is  a  large
commercial town. This has been wrongly ignored by the courts  below  on  the
ground that there was no pleading or proof to that effect.   Description  of
property mentioned in plaint and in the  gift deed itself shows that  it  is
commercial property in the city of Jaipur which is the capital of the  State
of  Rajasthan  and  is,  thus,  a  large  commercial  town.  Requirement  of
possession is also met when right to collect rent has been assigned  to  the
plaintiff under the gift deed itself, genuineness of which stands proved.
14.   We find force in the submission.  The gift had no infirmity under  the
Muslim Law either on the ground that the possession was not delivered or  on
the ground that the gift was hit by Hiba-bil-Musha.  The gift was by  father
to his minor son.  Property is under tenancy.  The gift is by  a  registered
deed.  Right to collect rent stands transferred to donee.  The  property  is
located in the city of Jaipur which is mentioned in Para 2 of the plaint  as
well as in the gift deed.  The courts below are not justified in not  giving
effect to the gift which has been held to be genuine.
15.   Accordingly, we allow this appeal, set  aside  the  impugned  judgment
and decree the suit.

                                                          ……..…………………………….J.
                                                              [ANIL R. DAVE]

                                                         .….………………………………..J.
                                                        [ ADARSH KUMAR GOEL]
NEW DELHI;
FEBRUARY 1, 2016.

Monday, February 15, 2016

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.= the provisions of SARFAESI Act can not override the provisions of the various Rent Control Acts to allow a Bank to evict a tenant from the tenanted premise, which has become a secured asset of the Bank after the default on loan by the landlord and dispense with the procedure laid down under the provisions of the various Rent Control Acts

  REPORTABLE
  IN THE SUPREME COURT OF INDIA                             CRIMINAL/CIVIL
                           APPELLATE JURISDICTION
               CRIMINAL APPEAL NO. 52  OF 2016
                 (Arising out of SLP (Crl.) No.8060 of 2015)

VISHAL N. KALSARIA                       ………APPELLANT
                                     Vs.
BANK OF INDIA & ORS.                   ………RESPONDENTS
                           with
                       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 out of SLP(Crl) No. 8066 of 2015)
                       CRIMINAL APPEAL NO. 57  OF 2016
       (Arising out of SLP(Crl) No. 8067 of 2015)
CRIMINAL APPEAL NO. 58  OF 2016         (Arising out of SLP(Crl) No. 8068
of 2015)
                       CRIMINAL APPEAL NO. 59  OF 2016
(Arising out of SLP(Crl) No. 8069 of 2015)
  CIVIL APPEAL NOS. 414-415   OF 2016
    (Arising out of SLP(C) Nos.13295-13296 of 2015)


                       CRIMINAL APPEAL NO. 753 OF 2014

                       CRIMINAL APPEAL NO. 754 OF 2014
                        CRIMINAL APPEAL NO. 62  OF 2016
       (Arising out of SLP(Crl) No. 6944 of 2015)
                        CRIMINAL APPEAL NO. 63  OF 2016
       (Arising out of SLP (Crl) No. 6945 of 2015)
                        CIVIL APPEAL NO. 469  OF 2016
       (Arising out of SLP(C) No. 25133 of 2015)
                       CRIMINAL APPEAL NO. 64  OF 2016
       (Arising out of SLP(Crl) No. 6941 of 2015)
                        CIVIL APPEAL NO. 417 OF 2016
       (Arising out of SLP(C) No. 28040 of 2015)
                        CIVIL APPEAL NO. 419  OF 2016
       (Arising out of SLP(C) No. 28446 of 2015)

                        CIVIL APPEAL NO. 420 OF 2016
       (Arising out of SLP(C) No. 28300 of 2015)
                        CIVIL APPEAL NO. 421 OF 2016
       (Arising out of SLP(C) No. 12772 of 2015)
                         and
                        CIVIL APPEAL NO. 422 OF 2016
       (Arising out of SLP(C)No. 31080 of 2015)

                               J U D G M E N T


V. GOPALA GOWDA, J.

The applications for impleadment are allowed.
Leave granted in all the special leave petitions.



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.



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.



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.  &  Ors.[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.”


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.

We have heard the learned counsel for both the parties.


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.


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)


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.

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 collateral security to such borrowed amount by  the  landlord/debtor.  On
default of payment of the borrowed  amount  by  the  landlords/debtors,  the
banks made application under Section 14(1) of the SARFAESI Act to the  Chief
Metropolitan Magistrate, praying that the  possession  of  the  premises  be
handed over to them in accordance with the provisions of the  SARFAESI  Act.
This Court in the case of Harshad Govardhan Sondagar (supra) held as under:
“34……In our view, therefore, the High Court  has  not  properly  appreciated
the judgment of this Court in Transcore (supra) and has lost  sight  of  the
opening words of sub-section (1) of Section 13 of  the  SARFAESI  Act  which
state that notwithstanding anything contained in Section 69 or  Section  69A
of the Transfer of Property Act, 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 the Act. The High Court has failed to appreciate that the  provisions  of
Section 13 of the SARFAESI Act thus override the provisions  of  Section  69
or Section 69A of the Transfer of Property Act, but does  not  override  the
provisions of the Transfer of Property Act  relating  to  the  rights  of  a
lessee under a lease created before receipt of a  notice  under  sub-Section
(2) of Section 13 of the SARFAESI Act by a borrower. Hence, the  view  taken
by the Bombay High Court in the impugned judgment as well as  in  M/s  Trade
Well (supra) so far as the  rights  of  the  lessee  in  possession  of  the
secured asset under a valid  lease  made  by  the  mortgagor  prior  to  the
creation of mortgage or after the creation of mortgage  in  accordance  with
Section 65A of the Transfer of Property Act is not correct and the  impugned
judgment of the High Court insofar it takes this view is set aside.”
                   (emphasis laid by this Court)


Mr. Pallav Shishodia, the learned senior counsel appearing on behalf of  the
appellant in the appeal @  out  of  S.L.P.  (C)  No.  8060  of  2015  places
reliance on the  decision  of  this  Court  in  Harshad  Govardhan  Sondagar
(supra), to contend that prior tenancy in respect of the mortgaged  property
to the Bank is protected in terms of the  Rent  Control  Act.  The  relevant
paragraphs of the decision are quoted as under:
“25. The opening words of sub-section (1) of Section 14 of the SARFAESI  Act
also provides that if any of the secured asset is required  to  be  sold  or
transferred by the secured creditor under the provisions  of  the  Act,  the
secured  creditor  may  take  the  assistance  of  the  Chief   Metropolitan
Magistrate or the District Magistrate. Where, therefore, such a  request  is
made by the secured creditor and the Chief Metropolitan  Magistrate  or  the
District Magistrate finds that the secured  asset  is  in  possession  of  a
lessee but the lease under which the lessee claims to be  in  possession  of
the secured asset stands determined in accordance with 4 Section 111 of  the
Transfer of Property Act, the Chief Metropolitan Magistrate or the  District
Magistrate may pass an order for delivery of possession of secured asset  in
favour of the secured creditor to enable the secured creditor  to  sell  and
transfer the same under the provisions of the SARFAESI Act. Sub-section  (6)
of Section 13 of the SARFAESI Act provides  that  any  transfer  of  secured
asset after taking possession of  secured  asset  by  the  secured  creditor
shall vest in the transferee all rights in, or in relation to,  the  secured
asset transferred as if the transfer had been made  by  the  owner  of  such
secured asset. In other words, the transferee of a secured  asset  will  not
acquire any right in a secured asset under sub-section (6) of Section 13  of
the SARFAESI Act, unless it has been effected  after  the  secured  creditor
has taken over possession of the secured asset. Thus,  for  the  purpose  of
transferring the secured asset and  for  realizing  the  secured  debt,  the
secured creditor will require  the  assistance  of  the  Chief  Metropolitan
Magistrate or the District Magistrate for taking  possession  of  a  secured
asset from the lessee where the 4 lease stands  determined  by  any  of  the
modes mentioned in Section 111 of the Transfer of Property Act.

32. When we read sub-section (1) of Section 17 of the SARFAESI Act, we  find
that  under  the  said  sub-section  “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  the
Chapter, may apply to the Debts Recovery  Tribunal  having  jurisdiction  in
the matter within 45 days from the date on  which  such  measures  had  been
taken. We agree with the Mr. Vikas Singh that the  words  ‘any  person’  are
wide enough to include a lessee also. It is also possible  to  take  a  view
that within 45 days from the date on which a possession notice is  delivered
or affixed or published under sub-rules  (1)  and  (2)  of  Rule  8  of  the
Security  Interest  (Enforcement)  Rules,  2002,  a  lessee  may   file   an
application before the Debts Recovery Tribunal having  jurisdiction  in  the
matter for restoration of possession in  case  he  is  dispossessed  of  the
secured asset. But when  we  read  subsection  (3)  of  Section  17  of  the
SARFAESI Act, we find  that  the  Debts  Recovery  Tribunal  has  powers  to
restore 5 possession of the secured asset to the borrower only  and  not  to
any person such as a lessee. Hence,  even  if  the  Debt  Recovery  Tribunal
comes to the conclusion that any of the measures referred to in  sub-section
(4) of Section 13 taken by the secured creditor are not in  accordance  with
the provisions of the Act, it  cannot  restore  possession  of  the  secured
asset  to  the  lessee.  Where,  therefore,  the  Debts  Recovery   Tribunal
considers the application of the lessee and comes  to  the  conclusion  that
the lease in favour of  the  lessee  was  made  prior  to  the  creation  of
mortgage or the lease though made after  the  creation  of  mortgage  is  in
accordance with the requirements of Section 65A of the Transfer of  Property
Act and the lease was valid and binding on the mortgagee and  the  lease  is
yet to be determined, the Debts Recovery Tribunal will not  have  the  power
to restore possession of the secured asset to the lessee. In our  considered
opinion, therefore, there is no remedy available under  Section  17  of  the
SARFAESI Act to the lessee to protect his lawful possession  under  a  valid
lease.”
The learned senior counsel contends that it is a  settled  position  of  law
that in the absence of a valid document of lease for more than one  year  or
in case of an  invalid  lease  deed,  the  relation  of  tenancy  between  a
landlord and the tenant is still created due to delivery  of  possession  to
the tenant and payment of rent to the landlord-owner  and  such  tenancy  is
deemed to be a tenancy from month to month in respect of such property.  The
learned senior counsel further  places  reliance  on  a  three  Judge  Bench
decision of this Court in Anthony v. K.C. Ittoop & Sons &  Ors.[2],  wherein
it was held as under:

“....so far as the instrument of lease is concerned there is  no  scope  for
holding that appellant is a lessee by virtue of  the  said  instrument.  The
court is disabled from using the instrument as evidence...

But this above finding does not exhaust  the  scope  of  the  issue  whether
appellant is a lessee of the building. A  lease  of  immovable  property  is
defined in Section 105 of the TP Act. A transfer  of  a  right  to  enjoy  a
property in consideration of  a  price  paid  or  promised  to  be  rendered
periodically or on specified occasions is  the  basic  fabric  for  a  valid
lease. The provision says that such a transfer can be made expressly  or  by
implication. Once there is such a transfer of right to enjoy the property  a
lease stands created. What is mentioned  in  the  three  paragraphs  of  the
first part of Section 107 of the TP Act are only the different modes of  how
leases are created.... Thus, de hors the instrument  parties  can  create  a
lease as envisaged in the second paragraph of Section 107 which reads thus:
All other leases of immovable property may be made either  by  a  registered
instrument or by oral agreement accompanied by delivery of possession.

When lease is a transfer of a right to enjoy the property and such  transfer
can be made expressly or by implication, the mere fact that an  unregistered
instrument came into existence would not stand in the way of  the  court  to
determine whether there was in fact a  lease  otherwise  than  through  such
deed.”
                   (emphasis laid by this Court)

  The learned senior counsel further contends that where  a  lease  deed  or
document of tenancy in respect of the property in question is for  a  period
exceeding one year, but such document has  not  been  registered,  then,  by
virtue of payment of rent, the relationship of tenancy  between  a  landlord
and the tenant comes into existence and in such cases, the  tenant  must  be
deemed to be a tenant from month to month and the same  would  amount  to  a
tenancy from month to month. Thus, in the instant case, the tenancy  of  the
appellants in respect of the property  in  question  which  is  the  secured
asset of the Bank being from month to month would also  be  protected  under
the provisions of the Rent Control Act.

The learned senior counsel further contends that according to  the  decision
of this Court in the case  of  Harshad  Govardhan  Sondagar  (supra),  if  a
person claiming to be a  tenant  or  lessee  either  produces  a  registered
agreement or  relies  on  an  oral  agreement  accompanied  by  delivery  of
possession, then such tenancy/possession of the property with the  appellant
as tenant needs to be protected. It is further contended  that  the  Harshad
Govardhan Sondagar (supra) has clearly held that the tenancy claims  of  the
tenants  are  to  be  decided  by  the  Chief  Metropolitan  Magistrate   in
accordance with  any  other  law  that  may  be  relevant  after  giving  an
opportunity of hearing to the persons who claim tenancy in respect  of  such
property. The term “any other law that may be relevant” clearly indicates  a
reference to the State Rent Protection laws, which in the case  at  hand  is
the Rent Control Act.  Thus,  the  protection  of  the  State  Rent  Control
legislation is also  to  be  considered  by  the  learned  magistrate  while
deciding an application filed by the Bank under Section 14 of  the  SARFAESI
Act.


On the other hand, Mr. Amarendra Sharan, learned  senior  counsel  appearing
on behalf of the respondents in Crl.A. @ S.L.P. (Crl) Nos.  6941,  6944  and
6945 of 2015 contends that the pith and substance of the  central  enactment
in the instant case, which is the SARFAESI  Act  needs  to  be  appreciated.
Proper implementation of the provisions  of  the  SARFAESI  Act  is  in  the
larger interest of the nation. The learned senior  counsel  places  reliance
on a Constitution Bench decision of  this  Court  in  the  case  of  Ishwari
Khetan Sugar Mills Pvt. Ltd. & Ors. v. State of  Uttar  Pradesh  &  Ors.[3],
wherein it was held as under:
“13. If in pith and substance a legislation falls within one  entry  or  the
other  but  some  portion  of  the   subject-matter   of   the   legislation
incidentally trenches upon and might enter a field under another  List,  the
Act as a whole would be valid  notwithstanding  such  incidental  trenching.
This is well established by a catena of decisions [see  Union  of  India  v.
H.S. Dhillon and Kerala State Electricity Board  v.  Indian  Aluminium  Co.]
After referring to these decisions  in  State  of  Karnataka  v.  Ranganatha
Reddy and Anr. Untwalia, J. speaking  for  the  Constitution  Bench  has  in
terms stated that the pith and substance of the Act has to  be  looked  into
and an incidental trespass would not invalidate the law.  The  challenge  in
that case was to the Nationalisation of contract carriages by the  Karnataka
State, inter alia, on the ground that the statute was invalid as  it  was  a
legislation on the subject of interstate trade and commerce. Repelling  this
contention the Court  unanimously  held  that  in  pith  and  substance  the
impugned legislation was for acquisition of contract carriages  and  not  an
Act which deals with inter-State trade and commerce.”


The learned senior counsel  further  contends  that  the  SARFAESI  Act  was
enacted by the Parliament under Entry 45 of List I of  the  Constitution  of
India. It is a special Act with a special purpose and  procedure  laid  down
for the recovery of the secured asset of the debtor by the Bank  to  recover
the amount due to it, and thus, any encroachment upon this  Act  should  not
be permitted, as it would defeat the laudable object of the Act,  which  has
been enacted keeping in view the larger public interest.

Mr. Vikas Singh, the learned senior  counsel  appearing  on  behalf  of  the
respondent State Bank of India in the appeal arising out of S.L.P.  (C)  No.
28040 of 2015 contends that the SARFAESI Act cannot be allowed  to  fail  at
the hands of the present appellants, who have no  registered  instrument  of
lease.
The learned senior counsel further contends that in light  of  the  decision
of this Court in  the  case  of  Harshad  Govardhan  Sondagar  (supra),  the
present case is barred by res judicata. He  places  reliance  on  the  three
Judge Bench decision of this Court in  the  case  of  Bhanu  Kumar  Jain  v.
Archana Kumar & Anr.[4], wherein it was held as under:
“It  is  now  well-settled  that  principles  of  res  judicata  applies  in
different stages of the same proceedings.

19. In Y.B. Patil (supra) it was held:

"4... It is well settled that principles of res judicata can be invoked  not
only  in  separate  subsequent  proceedings,  they  also  get  attracted  in
subsequent stage of the same proceedings. Once an order made in  the  course
of a proceeding becomes final, it would be binding at the  subsequent  state
of that proceeding..."

20. In Vijayabai (supra), it was held:

"13. We find in the present case the Tahsildar reopened  the  very  question
which finally stood concluded, viz., whether Respondent 1  was  or  was  not
the tenant of the suit land. He  further  erroneously  entered  into  a  new
premise of reopening the question of validity of the compromise which  could
have been in issue  if  at  all  in  appeal  or  revision  by  holding  that
compromise was arrived at  under  pressure  and  allurement.  How  can  this
question be up for determination when this  became  final  under  this  very
same statute?..."

21. Yet again in Hope Plantations Ltd. (supra), this  Court  laid  down  the
law in the following terms:

"17... One important consideration of public policy is  that  the  decisions
pronounced by courts of competent jurisdiction should be final, unless  they
are modified or reversed by appellate authorities; and the  other  principle
is that no one should be made to face the  same  kind  of  litigation  twice
over, because such a process would be contrary  to  considerations  of  fair
play and justice."


 Mr. M.T. George, the learned counsel appearing on behalf  of  the  Bank  in
the appeal arising out of S.L.P. (C) No. 12772 of  2015  contends  that  the
tenancy has not been determined conclusively, as the documents  produced  on
record to prove the relationship of tenancy are not registered  and  do  not
hold much water. Mr. Rajeev Kumar Pandey, the learned counsel  appearing  on
behalf of the respondent Bank in the appeal arising out of  S.L.P.  (C)  No.
31080 of 2015 submits that the property in question was mortgaged before  it
was leased. Such a lease would thus, not entitle  the  lessee  to  stop  the
bank from taking possession over the property which was mortgaged to it.

The other learned  counsel  appearing  on  behalf  of  other  Banks  in  the
connected appeals adopted the arguments advanced by  the  aforesaid  learned
senior counsel appearing on behalf  of  some  of  the  Banks.  It  was  also
contended that the appellants in the connected appeals have  not  been  able
to produce sufficient documentary evidence to prove that  they  are  tenants
in respect of the properties in question in the  proceedings  under  Section
14 of the SARFAESI Act and hence, they have no locus standi  to  prefer  the
above appeals questioning  the  correctness  of  the  Order  passed  by  the
learned Magistrate.


     We have carefully considered the above rival legal submissions made  on
behalf of the parties and answer the same as hereunder:


 The SARFAESI Act, which came into force from  21.06.2002,  was  enacted  to
provide procedures to the Banks to recover their security interest from  the
debtors  and  their  collateral  security  assets  as  provided  under   the
provisions of the Act. The scope of the Act was explained by this  Court  in
the case of Transcore v. Union of India & Anr.[5] as under:
“12.  The  NPA  Act,  2002  is  enacted  to  regulate   securitization   and
reconstruction of financial assets and enforcement of security interest  and
for matters connected therewith. The NPA Act enables the banks  and  FIs  to
realize long-term assets,  manage  problems  of  liquidity,  asset-liability
mismatch and to improve recovery of  debts  by  exercising  powers  to  take
possession of  securities,  sell  them  and  thereby  reduce  non-performing
assets by adopting measures for recovery and  reconstruction.  The  NPA  Act
further provides for setting up of asset reconstruction companies which  are
empowered to take possession of secured assets  of  the  borrower  including
the right to transfer by way of lease; assignment  or  sale.  The  said  Act
also empowers the said asset  reconstruction  companies  to  take  over  the
management of the business of the borrower....

13. Non-performing assets (NPA) are a cost to the economy. When the Act  was
enacted in 2002, the NPA stood at Rs 1.10 lakh crores. This was  a  drag  on
the economy. Basically, NPA is an account which becomes non-viable and  non-
performing in terms of the  guidelines  given  by  RBI.  As  stated  in  the
Statement of Objects and Reasons, NPA arises on account of mismatch  between
asset and liability. The NPA account is an asset in the hands  of  the  bank
or FI. It represents an amount receivable and realizable  by  the  banks  or
FIs. In that sense, it is an asset in the hands  of  the  secured  creditor.
Therefore, the NPA Act, 2002  was  primarily  enacted  to  reduce  the  non-
performing assets by adopting measures not only for recovery  but  also  for
reconstruction.  Therefore,  the  Act  provides  for  setting  up  of  asset
reconstruction  companies,  special  purpose  vehicles,   asset   management
companies, etc. which are empowered to take possession of secured assets  of
the borrower including the right to transfer by way of lease, assignment  or
sale. It also provides for  realization  of  the  secured  assets.  It  also
provides for takeover of the management of the borrower company.”

Thus, it becomes clear that the SARFAESI Act is meant to operate as  a  tool
for banks and ensures a smooth debt  recovery  process.  The  provisions  of
SARFAESI  Act  make  its  purport  amply  clear,  specifically   under   the
provisions of Sections 13(2) and 13(4) of the Act, which read as under:

“13. Enforcement of Security interest.-

(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).

“(4) In case the borrower fails to discharge his liability  in  full  within
the period specified in sub-section  (2),  the  secured  creditor  may  take
recourse to one or more of the following measures  to  recover  his  secured
debt, namely:--
(a) take possession of the secured assets  of  the  borrower  including  the
right to transfer by way of lease, assignment  or  sale  for  realising  the
secured asset....”

Further, the provision under Section 35 of the SARFAESI  Act  provides  that
it shall override all other laws, which is quoted as hereunder:
“35. The provisions of this Act to override other laws.- The  provisions  of
this Act shall have effect, notwithstanding anything inconsistent  therewith
contained in any other law for the time being in  force  or  any  instrument
having effect by virtue of any such law."

Providing a smooth and efficient recovery procedure to enable the  banks  to
recover the Non Performing Assets is a laudable object indeed,  which  needs
to be ensured for the development of the economy of the  Country.  What  has
complicated the matters, however, is the clash of this laudable object  with
another laudable object, namely, to secure the rights of the  tenants  under
the various Rent Control Acts. The history of these Rent  Control  Acts  can
be traced to as far back as the Second World War. At that time, due  to  the
massive inflation and shortage of commodities, not  only  had  the  cost  of
living risen exponentially, the tenants were also often left  to  the  mercy
of the landlords as far as evictions or prices of rent were concerned.  Rent
Control Acts have been  enacted  by  the  different  state  legislatures  to
secure the rights of the weaker sections of the society, viz., the  tenants.
Justice Krishna Iyer aptly observed in the case of Miss Santosh Mehta v.  Om
Prakash & Ors.[6]:
“2. Rent Control laws are basically  designed  to  protect  tenants  because
scarcity of accommodation is a nightmare for  those  who  own  none  and  if
evicted, will be helpless.”


The preamble of the Rent Control Act reads as under:
“An Act to unify, consolidate and amend the law relating to the  control  of
rent and repairs of certain premises and of  eviction  and  for  encouraging
the construction of new houses by assuring a fair return on  the  investment
by landlords and to provide for the  matters  connected  with  the  purposes
aforesaid……”


It becomes clear from a  perusal  of  the  preamble  of  the  Act  that  the
ultimate object behind the enactment of this legislation is to  control  and
regulate the rate of rent so that unnecessary hardship is not caused to  the
tenant, and also to provide protection to the tenants against arbitrary  and
unreasonable evictions from the possession of the property.  The  protection
of the tenants against unjust evictions becomes even  more  pronounced  when
examined in the light of Section 15 of the Rent Control Act, which reads  as
under:
“15. No ejectment ordinarily to be made if  tenant  pays  or  is  ready  and
willing to pay standard rent and permitted increases.(1)  A  landlord  shall
not be entitled to the recovery of possession of any  premises  so  long  as
the tenant pays, or is  ready  and  willing  to  pay,  the  amount  of  the,
standard rent and permitted increases, if any,  and  observes  and  performs
the other conditions of the tenancy, in so far as they are  consistent  with
the provisions of this Act.”

Section 15, thus, restricts the right of a landlord  to  recover  possession
of the tenanted premises from a tenant.

When we understand the factual matrix in the backdrop of the  objectives  of
the above two legislations, the controversy  in  the  instant  case  assumes
immense significance. There is an interest of the  bank  in  recovering  the
Non Performing Asset on the one  hand,  and  protecting  the  right  of  the
blameless tenant on the other. The Rent Control Act being a  social  welfare
legislation, must be construed as such. A landlord cannot  be  permitted  to
do indirectly what he has been barred from  doing  under  the  Rent  Control
Act, more so when the two legislations, that is the  SARFAESI  Act  and  the
Rent Control Act operate in completely different fields. While SARFAESI  Act
is concerned with Non Performing Assets of the Banks, the Rent  Control  Act
governs the relationship between a tenant and  the  landlord  and  specifies
the rights and liabilities of each as well as the rules  of  ejectment  with
respect to such tenants. The provisions of the SARFAESI Act cannot  be  used
to override the provisions of the Rent Control Act. If  the  contentions  of
the learned counsel for the respondent Banks are to be  accepted,  it  would
render the entire scheme of all Rent Control Acts operating in  the  country
as useless and nugatory. Tenants would be left wholly to the mercy of  their
landlords and in the fear that the landlord may use  the  tenanted  premises
as a security interest while taking a loan  from  a  bank  and  subsequently
default on it. Conversely, a landlord would  simply  have  to  give  up  the
tenanted premises as a security interest to the creditor banks while  he  is
still getting rent for the same.  In  case  of  default  of  the  loan,  the
maximum brunt will be  borne  by  the  unsuspecting  tenant,  who  would  be
evicted from the possession of the tenanted property by the Bank  under  the
provisions  of  the  SARFAESI  Act.  Under  no  circumstances  can  this  be
permitted, more so in view of  the  statutory  protections  to  the  tenants
under the Rent Control Act and also in respect of contractual tenants  along
with the possession of their properties which shall  be  obtained  with  due
process of law.

The issue of determination of tenancy is also one  which  is  well  settled.
While Section 106 of the Transfer of Property Act,  1882  does  provide  for
registration of leases which are created on  a  year  to  year  basis,  what
needs to be remembered is the effect of non-registration,  or  the  creation
of tenancy by way of an oral agreement. According  to  Section  106  of  the
Transfer of Property Act, 1882, a monthly tenancy shall be deemed  to  be  a
tenancy from month to month and must be registered if  it  is  reduced  into
writing. The Transfer of  Property  Act,  however,  remains  silent  on  the
position of law in cases where the agreement is not  reduced  into  writing.
If the two parties are executing their rights and liabilities in the  nature
of a landlord-tenant relationship and if regular  rent  is  being  paid  and
accepted, then the mere factum of non-registration of  deed  will  not  make
the lease itself nugatory. If  no  written  lease  deed  exists,  then  such
tenants are required to prove that they  have  been  in  occupation  of  the
premises as tenants by producing such  evidence  in  the  proceedings  under
Section 14 of the SARFAESI Act before the learned  Magistrate.  Further,  in
terms of Section 55(2) of the special law in the instant case, which is  the
Rent Control Act, the  onus  to  get  such  a  deed  registered  is  on  the
landlord. In light of the same, neither the landlord nor the  banks  can  be
permitted to exploit the fact  of  non  registration  of  the  tenancy  deed
against the tenant. Further, the learned counsel for the appellants  rightly
placed reliance on a three Judge Bench decision of  this  Court  in  Anthony
(supra). At the cost of repetition, in that case it was held as under:
“But the above finding does not exhaust the scope of the issue  whether  the
appellant was a lessee of the building. A lease  of  immovable  property  is
defined in Section 105 of the TP Act. A transfer  of  a  right  to  enjoy  a
property in consideration of  a  price  paid  or  promised  to  be  rendered
periodically or on specified occasions is  the  basic  fabric  for  a  valid
lease. The provision says that such a transfer can be made expressly  or  by
implication. Once there is such a transfer of right to enjoy the property  a
lease stands created. What is mentioned  in  the  three  paragraphs  of  the
first part of Section 107 of the TP Act are only the different modes of  how
leases are created. The first paragraph has  been  extracted  above  and  it
deals with the mode of creating the particular  kinds  of  leases  mentioned
therein.
The third paragraph can be read along  with  the  above  as  it  contains  a
condition to be complied with if the parties choose to  create  a  lease  as
per a registered instrument mentioned therein.
All other leases, if created, necessarily  fall  within  the  ambit  of  the
second paragraph. Thus, de hors the instrument parties can  create  a  lease
as envisaged in the second paragraph of Section 107 which reads thus:
All other leases of immovable property may be made either  by  a  registered
instrument or by oral agreement accompanied by delivery of possession.”

It further saddens us to see the manner in which the decision  in  the  case
of Harshad Govardhan Sondagar (supra)  has  been  misinterpreted  to  create
this confusion. Random sentences have been picked up from the  judgment  and
used, without any attempt to understand the true purport of the judgment  in
its entirety.

It is a well settled position of law that  a  word  or  sentence  cannot  be
picked up from a judgment to construe that it is the ratio decidendi on  the
relevant aspect of the case. It is also a well settled position of law  that
a judgment cannot be read as a statute and interpreted and applied  to  fact
situations. An eleven Judge  Bench  of  this  Court  in  the  case  of  H.H.
Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur of Gwalior &  Ors.  v.
Union of India[7] held as under:
“It is difficult to regard a word, a clause or a  sentence  occurring  in  a
judgment of this Court, divorced from its  context,  as  containing  a  full
exposition of the law on a question when the question did not even  fall  to
be answered in that judgment.”

The same view was reiterated by a Division Bench of this Court in  the  case
of Commissioner  of  Income  Tax  v.  Sun  Engineering  Works  (P.)  Ltd.[8]
Further, a three Judge Bench of this Court in the case of Union of India  v.
Dhanawanti Devi & Ors.[9] held as under:

“9. It is not  everything  said  by  a  Judge  while  giving  judgment  that
constitutes a precedent. The only thing in  a  judge’s  decision  binding  a
party is the principle upon which the case is decided and  for  this  reason
it is important to  analyse  a  decision  and  isolate  from  it  the  ratio
decidendi.  According  to  the  well-settled  theory  of  precedents,  every
decision contains three basic postulates - (i) findings of  material  facts,
direct and inferential. An inferential finding of  facts  is  the  inference
which  the  Judge  draws  from  the  direct,  or  perceptible  facts;   (ii)
statements of the  principles  of  law  applicable  to  the  legal  problems
disclosed by the facts; and (iii) judgment based on the combined  effect  of
the above. A decision is only an authority for  what  it  actually  decides.
What is of the essence in a decision is its ratio and not every  observation
found therein nor what logically follows from the various observations  made
in  the  judgment.  Every  judgment  must  be  read  as  applicable  to  the
particular facts proved, or assumed to be proved, since  the  generality  of
the expressions which may be found there is not intended  to  be  exposition
of the whole law, but governed and qualified by the particular facts of  the
case in which such expressions are to be found. It would, therefore, be  not
profitable to extract a sentence here and there from  the  judgment  and  to
build upon it because the essence of the  decision  is  its  ratio  and  not
every observation found therein. The enunciation of the reason or  principle
on which a question before a court has been decided is alone  binding  as  a
precedent. The concrete decision alone is binding  between  the  parties  to
it, but it is the abstract ratio decidendi, ascertained on  a  consideration
of the judgment in relation to the subject matter  of  the  decision,  which
alone has the force of law and which, when it  is  clear  what  it  was,  is
binding. It is only the principle laid down in the judgment that is  binding
law under Article 141 of the Constitution. A  deliberate  judicial  decision
arrived at after hearing an argument on a question which arises in the  case
or is put in issue may constitute a precedent, no matter  for  what  reason,
and the precedent  by  long  recognition  may  mature  into  rule  of  stare
decisis. It is the rule deductible from the application of law to the  facts
and circumstances of the case which constitutes its ratio decidendi.

10. Therefore, in order to understand and appreciate the binding force of  a
decision it is always necessary to see what were the facts in  the  case  in
which the decision was given  and  what  was  the  point  which  had  to  be
decided. No judgment can be read as if it is a statute. A word or  a  clause
or a sentence in the judgment cannot be regarded as  a  full  exposition  of
law. Law cannot afford to be static and therefore, Judges are to  employ  an
intelligent technique in the use of precedents……”
                             (emphasis laid by this Court)

The decision of this  Court  rendered  in  the  case  of  Harshad  Govardhan
Sondagar (supra) cannot be understood to have held that  the  provisions  of
the SARFAESI Act override the provisions of the Rent Control Act,  and  that
the Banks are at liberty to evict  the  tenants  residing  in  the  tenanted
premises which have been offered  as  collateral  securities  for  loans  on
which default has been done by the debtor/landlord.
As far as granting leasehold rights being created  after  the  property  has
been mortgaged to the bank, the consent of the creditor needs to  be  taken.
We have already taken this view in the case of  Harshad  Govardhan  Sondagar
(supra). We have not stated anything to the effect that the tenancy  created
after mortgaging the property  must  necessarily  be  registered  under  the
provisions of the Registration Act and the Stamp Act.

It is a settled position of law that once tenancy is created, a  tenant  can
be evicted only after following the due process of law, as prescribed  under
the provisions of the Rent Control  Act.  A  tenant  cannot  be  arbitrarily
evicted by using the provisions of the SARFAESI Act as that would amount  to
stultifying the statutory rights of protection given to the  tenant.  A  non
obstante clause (Section 35 of the SARFAESI Act) cannot be used to  bulldoze
the statutory rights vested on the tenants under the Rent Control  Act.  The
expression ‘any other law for the time  being  in  force’  as  appearing  in
Section 35 of the SARFAESI Act cannot mean to extend to each and  every  law
enacted by the Central and State legislatures. It can  only  extend  to  the
laws operating in the same field. Interpreting the non  obstante  clause  of
the SARFAESI Act, a three Judge Bench of this Court in the case  of  Central
Bank of India v. State of Kerala & Ors.[10] has held as under:

“18. The DRT Act and Securitisation Act were enacted by  Parliament  in  the
backdrop of recommendations made by the Expert Committees appointed  by  the
Central Government for examining  the  causes  for  enormous  delay  in  the
recovery of dues of banks and financial institutions  which  were  adversely
affecting fiscal reforms. The committees headed by Shri T. Tiwari  and  Shri
M. Narasimham suggested that the existing legal  regime  should  be  changed
and special adjudicatory machinery be created for ensuring  speedy  recovery
of  the  dues  of  banks  and   financial   institutions.   Narasimham   and
Andhyarujina Committees also suggested  enactment  of  new  legislation  for
securitisation and empowering the banks  etc.  to  take  possession  of  the
securities and sell them without intervention of the Court.

 XXX                 XXX             XXX

110. The DRT Act facilitated establishment of two-tier system of  Tribunals.
The Tribunals established at the first  level  have  been  vested  with  the
jurisdiction, powers and authority to summarily  adjudicate  the  claims  of
banks and financial institutions in the matter of  recovery  of  their  dues
without being bogged down  by  the  technicalities  of  the  Code  of  civil
Procedure. The Securitisation Act drastically changed the scenario  inasmuch
as it enabled banks, financial institutions and other secured  creditors  to
recover their dues without intervention of  the  Courts  or  Tribunals.  The
Securitisation Act also made provision for registration  and  regulation  of
securitisation/reconstruction companies, securitisation of financial  assets
of banks and financial institutions and other related provisions.

111. However, what is most significant to be  noted  is  that  there  is  no
provision in either of these enactments  by  which  first  charge  has  been
created in favour of banks, financial institutions or secured creditors  qua
the property of the borrower.

112. Under Section 13(1) of the  Securitisation  Act,  limited  primacy  has
been given to the right of a secured creditor to enforce  security  interest
vis-à-vis Section 69 or Section 69A of the  Transfer  of  Property  Act.  In
terms of that sub-Section, a secured creditor can enforce security  interest
without intervention of the Court  or  Tribunal  and  if  the  borrower  has
created any mortgage of the secured  asset,  the  mortgagee  or  any  person
acting on his behalf  cannot  sell  the  mortgaged  property  or  appoint  a
receiver of the income of the mortgaged property or any part  thereof  in  a
manner which may defeat  the  right  of  the  secured  creditor  to  enforce
security interest. This provision was enacted in  the  backdrop  of  Chapter
VIII of Narasimham Committee's 2nd Report in which  specific  reference  was
made to the provisions relating to mortgages under the Transfer of  Property
Act.

113. In an apparent bid to overcome  the  likely  difficulty  faced  by  the
secured creditor which may  include  a  bank  or  a  financial  institution,
Parliament incorporated the non obstante  clause  in  Section  13  and  gave
primacy to the right of secured creditor vis  a  vis  other  mortgagees  who
could exercise rights under Sections 69 or 69A of the Transfer  of  Property
Act. However, this primacy has not been extended to  other  provisions  like
Section 38C of the Bombay Act and Section 26B of the  Kerala  Act  by  which
first charge has been created in favour of the State over  the  property  of
the dealer or any person liable to pay the dues of sales tax, etc.
………………
116. The non obstante clauses contained in Section 34(1) of the DRT Act  and
Section  35  of  the  Securitisation  Act  give  overriding  effect  to  the
provisions of those Acts only if there is  anything  inconsistent  contained
in any other law or instrument having effect by virtue of any other law.  In
other words, if there is no provision in  the  other  enactments  which  are
inconsistent  with  the  DRT  Act  or  Securitisation  Act,  the  provisions
contained in those Acts cannot override other legislations.”
                             (emphasis laid by this Court)

If the interpretation of the provisions of SARFAESI Act as submitted by  the
learned senior counsel appearing on behalf of  the  Banks  is  accepted,  it
would not only tantamount to violation  of  rule  of  law,  but  would  also
render a valid Rent Control statute enacted  by  the  State  Legislature  in
exercise of its legislative power under Article 246 (2) of the  Constitution
of India useless  and  nugatory.  The  Constitution  of  India  envisages  a
federal feature,  which  has  been  held  to  be  a  basic  feature  of  the
Constitution, as has been held by the seven Judge Bench  of  this  Court  in
the case of S.R. Bommai & Ors. v. Union of  India[11],  wherein  Justice  K.
Ramaswamy in his concurring opinion elaborated as under:
“247. Federalism envisaged in the Constitution of India is a  basic  feature
in which the Union of India is permanent within the territorial  limits  set
in Article 1 of the Constitution and is indestructible.  The  State  is  the
creature of the Constitution and the law made by Articles 2  to  4  with  no
territorial integrity, but a permanent entity with its boundaries  alterable
by a law  made  by  Parliament.  Neither  the  relative  importance  of  the
legislative entries in Schedule VII, Lists I and  II  of  the  Constitution,
nor the fiscal control by the Union per se are  decisive  to  conclude  that
the  Constitution  is  unitary.  The  respective  legislative   powers   are
traceable to Articles 245 to 254 of the  Constitution.  The  State  qua  the
Constitution is federal in structure and  independent  in  its  exercise  of
legislative  and  executive  power.  However,  being  the  creature  of  the
Constitution the State has no right to secede or claim sovereignty. Qua  the
Union, State is quasi-federal. Both are coordinating institutions and  ought
to exercise their  respective  powers  with  adjustment,  understanding  and
accommodation to render socio-economic and political justice to the  people,
to preserve and elongate the constitutional goals including secularism.
248.  The  preamble  of  the  Constitution  is  an  integral  part  of   the
Constitution. Democratic form of Government, federal  structure,  unity  and
integrity of the nation, secularism, socialism, social justice and  judicial
review are basic features of the Constitution.”
    (emphasis laid by this Court)

In view of the above legal position, if  we  accept  the  legal  submissions
made on behalf of the Banks to hold that  the  provisions  of  SARFAESI  Act
override the provisions of the various Rent Control Acts to allow a Bank  to
evict a tenant from the tenanted premise, which has become a  secured  asset
of the Bank after the default on loan by the landlord and dispense with  the
procedure laid down under the provisions of the various  Rent  Control  Acts
and the  law  laid  down  by  this  Court  in  catena  of  cases,  then  the
legislative powers of the state legislatures are denuded which would  amount
to subverting the law enacted by  the  State  Legislature.  Surely,  such  a
situation  was  not  contemplated  by  the  Parliament  while  enacting  the
SARFAESI Act and therefore the interpretation  sought  to  be  made  by  the
learned counsel appearing on behalf of the Banks cannot be accepted by  this
Court as the same is wholly untenable in law.

 We are unable to  agree  with  the  contentions  advanced  by  the  learned
counsel appearing on behalf of the respondent Banks.


In view of the foregoing, the impugned judgments and orders  passed  by  the
High Court/ Chief Metropolitan Magistrate are set aside and the appeals  are
allowed. We further direct that the amounts which are  in  deposit  pursuant
to the conditional interim order of this Court towards  rent  either  before
the Chief Metropolitan Magistrate/Magistrate Court  or  with  the  concerned
Banks, shall be adjusted by the concerned Banks towards the  debt  due  from
the debtors/landlords in respect of the appellants  in  these  appeals.  The
enhanced rent by way of conditional interim order shall be continued  to  be
paid to the respective Banks, which amount shall also  be  adjusted  towards
debts of the debtors/landlords. All the pending  applications  are  disposed
of.


                                                    …………………………………………………………J.
                                 [V. GOPALA GOWDA]



                                                    …………………………………………………………J.
                                 [AMITAVA ROY]

 New Delhi,
 January 20,2016

-----------------------
[1]    (2014) 6 SCC 1
[2]    (2000) 6 SCC 394
[3]    (1980) 4 SCC 136
[4]    (2005) 1 SCC 787
[5]   (2008) 1 SCC 125
[6]    (1980) 3 SCC 610
[7]    (1971) 1 SCC 85
[8]    (1992) 4 SCC 363
[9]    (1996) 6 SCC 44
[10]   (2009) 4 SCC 94
[11]   (1994) 3 SCC 1