Tenancy Must Comply with Section 65-A of Transfer of Property Act Between Mortgage and SARFAESI Notice – P&H HC
In a recent judgment Punjab and Haryana High Court has emphasized the importance of compliance with Section 65-A of the Transfer of Property Act regarding tenancy. The judgment pertains to cases where a tenancy arises after the creation of a mortgage but before the issuance of a notice under Section 13(2) of the SARFAESI Act.
Justice Sureshwar Thakur, who presided over the case along with Justice Kuldeep Tiwari, issued a clear directive, stating, “The objective of the SARFAESI Act, coupled with the T.P. Act and the Rent Act, are required to be reconciled herein.” This statement underscores the importance of harmonizing various laws to facilitate the quick remediation of bad debts, a key goal of the SARFAESI Act.
The case revolved around the bank’s efforts to reclaim mortgaged properties from borrowers in default. The borrowers, in collusion with a purported tenant, Arjan Singh Rawat, had employed dubious tactics to obstruct the bank’s actions. They claimed tenancy rights over the mortgaged properties, leading to a protracted legal battle.
One of the key legal principles highlighted in the judgment draws attention to the establishment of valid tenancy rights. The court clarified that if a valid tenancy existed before the creation of a mortgage, the tenant’s possession could not be disturbed by a secured creditor. This principle ensures protection for tenants with pre-existing leases.
However, the judgment also stipulates that if a tenancy arises after the mortgage’s creation but before the issuance of a notice under Section 13(2) of the SARFAESI Act, it must comply with the conditions of Section 65-A of the Transfer of Property Act. This provision ensures that tenants do not exploit the situation to avoid eviction.
Additionally, the court emphasized that any claim for possession of a secured asset for more than a year must be supported by a registered instrument. In the absence of such documentation, tenants relying on unregistered agreements or oral arrangements accompanied by delivery of possession are considered tenants in sufferance or trespassers after one year.
Justice Thakur’s ruling in this case reaffirms the efficiency and effectiveness of the SARFAESI Act in facilitating the recovery of bad debts and ensuring the timely redemption of loans provided by financial institutions. It also serves as a reminder that the Act’s provisions override conflicting statutes, fostering a more streamlined and responsive debt recovery process.
This landmark judgment underscores the judiciary’s commitment to upholding the integrity of financial laws while safeguarding the rights of genuine tenants. It sets a significant precedent for future cases involving the SARFAESI Act’s applicability in matters related to tenancy and debt recovery.
Date of decision: 27.09.2023
IDFC FIRST BANK LTD. vs DISTRICT MAGISTRATE, CHANDIGARH & ORS.
