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CaseIQ

Sanjeev Bansal v. Oman International Bank Saog & Anr.

Delhi High Court

Aug 7, 2006

Judgment

CaseIQ

Smart Summary (Beta)

Factual and Procedural Background

The petitioner, claiming to be a tenant in physical possession of the entire first floor of property No. H-36, South Extension Part-I, New Delhi, by virtue of a lease deed dated 15th May 2001 executed by the principal borrower and mortgagor M/s. Eupharma Laboratories Ltd., challenged the order dated 25th July 2006 passed by the Debt Recovery Appellate Tribunal (DRAT) in Miscellaneous Appeal No. 169/2005. The principal borrower had mortgaged the property to Oman International Bank by a memorandum of mortgage dated 4th February 1999. Upon default in repayment, the bank invoked the provisions of the SARFAESI Act to take possession of the mortgaged property. The petitioner filed an appeal under Section 17(1) of the SARFAESI Act before the Debt Recovery Tribunal (DRT) seeking to restrain the bank from taking possession. The DRT dismissed the appeal on 28th July 2005, and the petitioner’s subsequent appeal before the DRAT was also dismissed on 25th July 2006.

Legal Issues Presented

Whether the petitioner, as a tenant under a lease deed executed by the mortgagor, is protected from eviction under the provisions of the Delhi Rent Control Act (DRC Act) despite the mortgagee enforcing possession under the SARFAESI Act.
Whether the provisions of the Delhi Rent Control Act override the rights of the mortgagee under the Transfer of Property Act and the SARFAESI Act in the context of possession of the mortgaged property.
The validity and effect of the lease deed executed by the mortgagor in light of Section 65A of the Transfer of Property Act, which restricts the duration and terms of leases made by a mortgagor.

Arguments of the Parties

Petitioner’s Arguments

The petitioner contended that as a tenant in physical possession under a lease deed, he is fully protected by the Delhi Rent Control Act and cannot be dispossessed without following its provisions.
He emphasized that Section 14 of the Delhi Rent Control Act contains a non obstante clause providing protection to tenants against eviction notwithstanding any other law or contract.
The petitioner argued that the provisions of the DRC Act should have an overriding effect over the Transfer of Property Act and the mortgagee’s rights.

Respondent/Bank’s Position (Implied from Court’s Reasoning)

The mortgagee bank enforced its rights under the SARFAESI Act following the borrower's default on the loan.
The mortgage was validly executed prior to the lease deed, which was unregistered and on insufficient stamp paper.
The lease deed contravened Section 65A of the Transfer of Property Act, which restricts the mortgagor’s power to lease the mortgaged property to a maximum of three years and imposes other conditions.
The mortgagee’s right to possession under the SARFAESI Act supersedes any tenancy rights created by an invalid lease deed.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court analyzed the interaction between the Delhi Rent Control Act, the Transfer of Property Act, and the SARFAESI Act. It observed that the protection against eviction under Section 14(1) of the Delhi Rent Control Act applies only to tenants vis-à-vis landlords and does not extend to mortgagees enforcing their rights under the SARFAESI Act. The court noted that the lease deed relied upon by the petitioner was executed after the mortgage deed, was unregistered, and on insufficient stamp paper, thereby lacking validity.

Further, the court examined Section 65A of the Transfer of Property Act, which restricts the mortgagor’s power to lease the mortgaged property to a maximum duration of three years and imposes specific conditions on such leases. The petitioner’s lease deed contravened these statutory requirements, being purportedly for an unlimited period and not complying with Section 65A. Consequently, the petitioner could not claim protection as a tenant under the Delhi Rent Control Act.

Thus, the court concluded that neither the mortgagor nor the lessee could defeat the mortgagee’s right to possession, and the mortgagee’s rights under the SARFAESI Act prevailed.

Holding and Implications

The petition is dismissed.

The court upheld the orders of the Debt Recovery Appellate Tribunal dismissing the petitioner’s appeal. The decision confirms that a mortgagee’s right to possession under the SARFAESI Act is not overridden by tenancy rights claimed under an invalid lease deed, especially when such lease contravenes the statutory restrictions under Section 65A of the Transfer of Property Act. No new precedent was established; the ruling reaffirms the primacy of mortgagee rights in such circumstances and the limited scope of tenant protection under the Delhi Rent Control Act when conflicting with mortgagee’s statutory rights.

Show all summary ...

Kailash Gambhir, J.— The petitioner in the present writ petition has assailed the order dated 25th July, 2006 passed by the learned Debt Recovery Appellate Tribunal in Miscellaneous Appeal No. 169/2005. The principal contention raised by the petitioner is that he being a tenant and in physical possession of the entire first floor of the property bearing No. H-36, South Extension Part-I, New Delhi-110049 by virtue of lease deed dated 15th May, 2001, duly executed by the principal borrower and mortgagor of the property M/s. Eupharma Laboratories Ltd., is fully protected under the provisions of Delhi Rent Control Act and cannot be dispossessed without taking recourse to the provisions of the Delhi Rent Control Act. We need not narrate the detailed facts. But it is suffice to state that M/s. Eupharma Laboratories Ltd. who is a principal borrower had availed some loans from Oman International Bank after mortgaging the said flat in question in favour of the bank by executing a memorandum of mortgage dated 4th February, 1999. On the failure of the borrower to pay back the loan, the bank had invoked the relevant provisions of SRFAESI Act and approached the learned CMM, Delhi so as to seek directions for taking over the possession of the said mortgaged property. The present petitioner had filed an appeal under Section 17(1) of the SRFAESI Act before the Debt Recovery Tribunal so as to seek restraint order against the bank from taking over the physical possession of the secured asset i.e the mortgaged property bearing No. H-36, Ist Floor (entire), NDSE Part-I, New Delhi. The Debt Recovery Tribunal dismissed the appeal of the petitioner vide order dated 28th July, 2005. Being aggrieved by the said order of the DRT, the petitioner challenged the same before the Debt Recovery Appellate Tribunal and vide order dated 25th July, 2006, the Debt Recovery Appellate Tribunal did not find any merit in the appeal of the petitioner and the same was dismissed.

2. The petitioner has laid much emphasis on his contention that the provisions of the DRC Act will have over-ridding effect on the provision of Transfer of Property Act and he being a tenant enjoys the protection against any sort of eviction under Section 14 of the Delhi Rent Control Act which starts with non obstante clause. It would be worthwhile to reproduce the relevant portion of Section 14(1) of the Delhi Rent Control Act:

“14. Protection of tenant against eviction—

(1) Notwithstanding anything to the contrary contained in any other law or contract, no order or decree for the recovery of possession of any premises shall be made by any Court or Controller in favour of the landlord against a tenant:

Provided that the Controller may, on an application made to him in the prescribed manner, make an order for the recovery of possession of the premises on one or more of the following grounds only, namely………………”

3. Even a cursory glance over the said provision would clearly show that the protection afforded to a tenant is from the landlord of the premises and the landlord of the premises cannot recover possession from the tenant unless he takes recourse to any of the grounds as available to him under Section 14(1) of the Delhi Rent Control Act and the right of the tenant is fully protected notwithstanding anything contrary contained in any other law or contract. In the present case, it is a mortgagee who has enforced his right under the SRFAESI Act against the principal borrower who had mortgaged the said property in question by duly and validly executing the memorandum of mortgage in favour of the mortgagor. There is no denial of the fact that the said unregistered lease deed on a insufficient stamp paper was executed much later than the deed of mortgage.

4. Section 65A of the Transfer of property Act clearly mandates that the duration of lease to be executed by the mortgagor cannot exceed three years. It will be better to reproduce Section 65A which deals with the power of mortgagor to lease the mortgaged property.

“65-A. Mortgagor's power to lease—(1) Subject to the provisions of Sub-section (2), a mortgagor, while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee.

(2)(a) Every such lease shall be such as would be made in the ordinary course of management of the property concerned, and in accordance with any local law, custom or usage.

(b) Every such lease shall reserve the best rent that can reasonably be obtained, and no premium shall be paid or promised and no rent shall be payable in advance.

(d) Every such lease shall take effect from the date not later than six months from the date on which it is made.

(e) In the case of a lease of buildings, whether leased with or without the land on which they stand, the duration of the lease shall in no case exceed three years, and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid within a time therein specified.

(3) The provisions of Sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage-deed; and the provisions of Sub-section (2) may be varied or extended by the mortgage-deed and, as so varied and extended, shall, as far as may be, operate in like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that sub-section.”

5. Section 65A of the Transfer of Property Act deals with the power of the mortgagor to lease the mortgaged property. This power of mortgagor is not unfettered but has been conditioned under Sub-sections 1, 2 and 3 of section 65a of tp act.

6. Manifestly the said unregistered lease was created for the alleged unlimited period through unregistered lease deed in complete contravention of Section 65A of the Transfer of Property Act. As per the said provision of section 65a, the lessee can enjoy the protection if the lease is created by the mortgagor in conformity with the mandate of requirements laid down in section 65a of tp act and not otherwise. Neither the mortgagor nor the lessee can defeat the right of mortgagee and no lessee can claim any protection unless his tenancy is as per the requirements of Section 65A of Transfer of Property Act. The present petition is devoid of any merits. We would not like to interfere in the orders passed by the DRAT.

7. The petition is dismissed.

Petition dismissed.