The Supreme Court of India, in the case titled as Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd. & Ors. (copy available here) decided on April 03, 2014 - while dealing with the rights of the Lessee (remedies available where he is threatened to be dispossessed by any action taken by the secured creditor under Section 13 of the SARFAESI Act) have held as under:
When a lessee becomes aware of the possession being taken by the secured creditor, he may either surrender the possession or resist the attempt of the secured creditor to take the possession of the secured asset by producing before the authorized officer proof that he was inducted as a lessee prior to the creation of mortgage or that he was a lessee 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.
Where the lessee resists the attempt of the secured creditor to take possession, the authorized 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 (CMM) or the District Magistrate (DM) will have to give notice and give an opportunity of hearing to the person claiming to be lessee as well as the secured creditor, consistent with the principles of natural justice, and then take a decision.
If the CMM or the DM 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 Transfer of Property Act and that lease has not been determined in accordance with the provisions of Section 111 of Transfer of Property Act, he cannot pass an order delivering possession of the secured secured assets to the secured creditor. But in case he comes to a conclusion that there is no valid lease made either before the creation of mortgage or after creation of the mortgage satisfying the requirements of Section 65A of Transfer of Property Act or even if there was a valid lease, the lease stands determined in accordance with Section 111 of Transfer of Property Act, he can pass an order for delivering possession of the secured asset to the secured creditor.
Section 14(3) of the SARFAESI Act provides that no act of the CMM or DM or any officer authorized by the CM or DM done in pursuance of Section 14 shall be called in question in any court or before any authority. The SARFAESI Act, therefore, attaches finality to the decision of the CMM or the DM and this decision cannot be challenged before any court or any authority. But this Court has repeatedly held that statutory provisions attaching finality to the decision of an authority excluding the power of any other authority or Court to examine such a decision will not be a bar for the High Court or this Court to exercise jurisdiction vested by the Constitution because a statutory provision cannot take away a power vested by the Constitution.
In our view, therefore, the decision of the CMM or the DM can be challenged before the High Court under Articles 226 and 227 of the Constitution by any aggrieved party and if such a challenge is made, the High Court can examine the decision of the CMM or the DM, as the case may be, in accordance with the settled principles of law.
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 Transfer of Property Act, but does not override the provisions of Transfer of Property Act relating to the rights of the lessee under a lease created before receipt of a notice under sub section (2) of Section 13 of the SARFAESI Act by a borrower.
When a lessee becomes aware of the possession being taken by the secured creditor, he may either surrender the possession or resist the attempt of the secured creditor to take the possession of the secured asset by producing before the authorized officer proof that he was inducted as a lessee prior to the creation of mortgage or that he was a lessee 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.
Where the lessee resists the attempt of the secured creditor to take possession, the authorized 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 (CMM) or the District Magistrate (DM) will have to give notice and give an opportunity of hearing to the person claiming to be lessee as well as the secured creditor, consistent with the principles of natural justice, and then take a decision.
If the CMM or the DM 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 Transfer of Property Act and that lease has not been determined in accordance with the provisions of Section 111 of Transfer of Property Act, he cannot pass an order delivering possession of the secured secured assets to the secured creditor. But in case he comes to a conclusion that there is no valid lease made either before the creation of mortgage or after creation of the mortgage satisfying the requirements of Section 65A of Transfer of Property Act or even if there was a valid lease, the lease stands determined in accordance with Section 111 of Transfer of Property Act, he can pass an order for delivering possession of the secured asset to the secured creditor.
Section 14(3) of the SARFAESI Act provides that no act of the CMM or DM or any officer authorized by the CM or DM done in pursuance of Section 14 shall be called in question in any court or before any authority. The SARFAESI Act, therefore, attaches finality to the decision of the CMM or the DM and this decision cannot be challenged before any court or any authority. But this Court has repeatedly held that statutory provisions attaching finality to the decision of an authority excluding the power of any other authority or Court to examine such a decision will not be a bar for the High Court or this Court to exercise jurisdiction vested by the Constitution because a statutory provision cannot take away a power vested by the Constitution.
In our view, therefore, the decision of the CMM or the DM can be challenged before the High Court under Articles 226 and 227 of the Constitution by any aggrieved party and if such a challenge is made, the High Court can examine the decision of the CMM or the DM, as the case may be, in accordance with the settled principles of law.
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 Transfer of Property Act, but does not override the provisions of Transfer of Property Act relating to the rights of the 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 if any of the appellants claim that they are entitled to possession of a secured asset for any term exceeding one year from the date of the lease made in his favour, he 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 CMM or the DM 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.
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