Hon'ble Devendra Kumar Upadhyaya, J.
The petitioner has, in these proceedings under Article 226 of the Constitution, sought to question the legality of an order passed by the District Magistrate, Lucknow on 9 June 2014 under the provisions of Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
2. The premises in question comprise of a residential property bearing No.C-2354 situated at Indira Nagar, Lucknow. The property was originally allotted by the U.P. Avas Evam Vikas Parishad, Lucknow to the fifth respondent on 12 May 1980 against the payment of sale consideration. The petitioner claims that the accommodation was let out to him in January 1988 on a monthly rent of Rs.400/-. The petitioner has stated that the allotment of the premises to the fifth respondent was cancelled by the U.P. Avas Evam Vikas Parishad in 1991, but was restored on payment of the outstanding dues and eventually, a registered sale deed was executed on 2 November 1994 in favour of the fifth respondent. The petitioner has set up a case that the fifth respondent entered into an agreement with him for the sale of the premises and in performance of the agreement, an amount of Rs.50,000/- was paid on 8 February 1995, a further sum of Rs.50,000/- on 12 February 1995, Rs.30,000/- on 25 July 1995, Rs.30,000/- on 1 February 1999, Rs.40,000/- on 8 February 1999 and Rs.30,000/- on 15 February 1999. Some of the payments were made by cheques or, as the case may be, by Demand Drafts, while other payments were made in cash. At this stage, it may be noted that the petitioner has annexed various receipts executed in his favour from Annexure Nos.2 to 7 to the writ proceedings.
3. The petitioner has filed a suit (Regular Suit No.108 of 2002) against the fifth respondent for specific performance and for injunction restraining the fifth respondent from disturbing his possession of the property. A written statement was filed in the Suit. The trial Judge granted an ad-interim injunction in favour of the petitioner on 8 March 2002 which holds the field. The fifth respondent filed a Suit against the petitioner in 2003 (SCC Suit No.127 of 2003) in the Court of the Small Causes Judge, Lucknow for recovery of arrears and for eviction.
4. The fifth respondent sold the residential property through her attorney, respondent no.6, to respondent nos.7 and 8 on 20 February 2004. The case of the fourth respondent-State Bank of India is that respondent nos.7 and 8 had obtained finance from the Bank against the creation of mortgage of the residential property. The deed of mortgage is stated to be of 19 February 2004. The Bank filed Original Application No.141 of 2007 before the Debts Recovery Tribunal against respondent nos.7, 8 and 9 on 31 August 2007. The Bank also instituted proceedings under the SARFAESI Act. Measures were adopted under Section 13 (4) of the Act. The Bank moved the District Magistrate for an order of possession under Section 14 of the Act. The petitioner filed objections before the District Magistrate setting out his case that he had obtained the residential house on rent from the original landlady and that he had entered into an agreement to sell. There is a reference in the objections filed by the petitioner to the Suit instituted by the petitioner for specific performance and injunction and to the Suit for eviction filed by the fifth respondent.
5. The District Magistrate allowed the application under Section 14 of the Act by his impugned order dated 9 June 2014. The District Magistrate has noted that the petitioner has filed objections. However, he has declined to consider the merits of the objections on the ground that the petitioner is not a party to the proceedings under Section 14 of the Act, nor has he filed any application for being made a party.
6. At this stage, it would be appropriate for the Court to advert to a recent judgment of the Supreme Court in Harshad Govardhan Sondager Vs. International Assets Reconstruction Co. Ltd. & Ors.1 The Supreme Court has held that where a lessee becomes aware of the possession being taken by the secured creditor in respect of the secured asset of which he is the lessee, he may either surrender possession or resist the attempt of the secured creditor on the ground that he was inducted as a lessee prior to the creation of the mortgage. Thereupon it has been held that the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate must furnish a notice and an opportunity of being heard to the person claiming to be the lessee as well as to the secured creditor before taking a decision. The ratio of the judgment is contained in the following observations:-
"21. When, therefore, a lessee becomes aware of the possession being taken by the secured creditor, in respect of the secured asset in respect of which he is the lessee, from the possession notice which is delivered, affixed or published in sub-rule (1) and sub-rule (2) of Rule 8 of the Security Interest (Enforcement) Rules, 2002, he may either surrender possession or resist the attempt of the secured creditor to take the possession of the secured asset by producing before the authorised officer proof that he was inducted as a lessee prior to the creation of the mortgage or that he was a lessee under the mortgagor in accordance with the provisions of Section 65A of the Transfer of Property Act and that the lease does not stand determined in accordance with Section 111 of the Transfer of Property Act. If the lessee surrenders possession, the lease even if valid gets determined in accordance with clause (f) of Section 111 of the Transfer of Property Act, but if he resists the attempt of the secured creditor to take possession, the authorised officer cannot evict the lessee by force but has to file an application before the Chief Metropolitan Magistrate or the District Magistrate under section 14 of the sarfaesi act and state in the affidavit accompanying the application, the name and address of the person claiming to be the lessee. When such an application is filed, the Chief Metropolitan Magistrate or the District Magistrate will have to give a notice and give an opportunity of hearing to the person claiming to be the lessee as well as to the secured creditor, consistent with the principles of natural justice, and then take a decision. If the Chief Metropolitan Magistrate or District Magistrate is satisfied that there is a valid lease created before the mortgage or there is a valid lease created after the mortgage in accordance with the requirements of Section 65A of the Transfer of Property Act and that the lease has not been determined in accordance with the provisions of Section 111 of the Transfer of Property Act, he cannot pass an order for delivering possession of the secured asset to the secured creditor. But in case he comes to the conclusion that there is in fact no valid lease made either before creation of the mortgage or after creation of the mortgage satisfying the requirements of Section 65A of the Transfer of Property Act or that even though there was a valid lease, the lease stands determined in accordance with Section 111 of the Transfer of Property Act, he can pass an order for delivering possession of the secured asset to the secured creditor."
7. The judgment of the Supreme Court also holds that the remedy of an appeal under Section 17 of the Act is not available to the lessee to protect his lawful possession under a valid lease.
8. Having regard to the law laid down by the Supreme Court in the aforesaid judgment, it was but necessary for the District Magistrate to consider the objections which were filed by the petitioner to the application of the Bank under Section 14 of the Act. The District Magistrate has evidently not considered the objections of the petitioner only on the ground that the petitioner is not a party to the proceedings under Section 14 of the Act and had not made any application for being made a party. This approach is palpably erroneous having due regard to the law laid down by the Supreme Court in the aforesaid judgment. Hence, we have considered it appropriate and proper to take up the petition for final disposal and to remand the proceedings back to the District Magistrate for consideration afresh.
9. The Bank which had moved the application under Section 14 of the Act as well as the auction purchaser who had purchased the property from the Bank through an auction are before the Court and are represented by Sri Anurag Srivastava and Sri Shakti Ojha, learned Advocates respectively. These being the two contesting parties, notice to respondent nos.5 to 9, who are the original owner, borrower and the original transferees, is not necessary since they have, as the record indicates, extinguished their interest by subsequent dealings in the property.
10. For these reasons, we allow the petition and set aside the impugned order of the District Magistrate dated 9 June 2014 and restore the proceedings back to the District Magistrate for consideration afresh. On remand, the District Magistrate shall consider the objections of the petitioner and dispose of the proceedings having due regard to the law laid down by the Supreme Court in Harshad Govardhan Sondagar (supra). We request the District Magistrate, upon remand, to dispose of the proceedings after hearing all the concerned parties including the petitioner, Bank and the auction purchaser, preferably within a period of three months from the date of receipt of a certified copy of this order. All rights and contentions on merits are kept open.
11. The petition is, accordingly, disposed of. There shall be no order as to costs.
Comments