2021 INSC 0361 REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURSIDCITON CRIMINAL APPEAL NO(s).843­844 OF 2021 (Arising out of S.L.P. (Crl.) No(s). 2969­2970 of 2016) HEMRAJ RATNAKAR SALIAN  …APPELLANT(s)  VERSUS HDFC BANK LTD. & ORS.          …RESPONDENT(s) J U D G M E N T S.ABDUL NAZEER, J. Leave granted. 2. These   appeals   are   directed   against   the   Orders   dated 30.12.2015  and   06.01.2016   in   Case  C.C.   No.381/SA/2014   passed by the Chief Metropolitan Magistrate, Esplanade, Mumbai, rejecting the Application (Exh.­8) filed by the appellant herein for restraining HDFC Bank, the first respondent herein, from taking possession of the property in the appellant’s possession. 1 3. HDFC Bank had granted financial facility to respondent nos.2 and   3  (for   short,   ‘the   Borrowers’)   of   Rs.5,50,00,000/­   (Rupees  Five Crore Fifty Lakhs). On 03.04.2013, the Borrowers had mortgaged a property bearing Flat No.501, 5 th  Floor, Solitaire, Village Kopari, Adi Shankaracharya Road, MHADA Layout, Powai, Andheri (E), Mumbai (for   short,   “the   Secured   Asset”)   in   favour   of   the   Bank   with   an intention to secure the said credit facility. 4. The   accounts   of   the   Borrowers   were   declared   as   non­ performing   assets   (NPA)   on   31.10.2013.   On   25.01.2014,   the   Bank issued   a   notice   under   Section   13(2)   of   the   Securitisation   and Reconstruction   of   Financial   Assets   and   Enforcement   of   Security Interest Act, 2002 (for short, “SARFAESI Act”) to the Borrowers.   It is the case of the appellant that he is a tenant of the Secured Asset on   a   monthly   rent   of   Rs.20,000/­   since   12.06.2012   with   an increase of 5% every year. He has been paying rent regularly to his landlord since inception of his tenancy.  5. The   appellant   filed   Exh.8   application   before   the   Magistrate seeking   protection   of   his   possession   of   the   Secured   Asset   as   the Magistrate   was   ceased   with   the   petition   under   Section   14   of 2 SARFAESI Act filed by the respondent no.1­Bank.  Vide Order dated 30.12.2015,   the   intervention   application   of   the   appellant   was dismissed   by   the   Magistrate   holding   that   there   was   no   registered tenancy placed on record by the appellant.   6. We   have   heard   learned   counsel   for   the   parties.   Learned counsel   for   the   appellant   would   contend   that   the   appellant   is   a protected   tenant   under   the   provisions   of   the   Maharashtra   Rent Control Act 1999. He has been paying rent regularly to the landlord. He has also paid advance rent till 17.12.2018. There are continuous rent   receipts   with   him   from   the   date   of   his   induction   as   a   tenant. The tenant was residing in the said premises on the basis of an oral tenancy from 12.06.2012. Therefore, he cannot be evicted from the Secured Asset without due process of law.   7. On   the   other   hand,   learned   counsel   for   the   respondent­Bank submits   that   the   rent   receipt   said   to   have   been   issued   by   the landlord   for   the   period   from   12.06.2012   to   12.05.2013   is   of 12.05.2013 which is after the date of creation of mortgage in favour of   the   Bank.     There   is   absolutely   no   material   to   show   that   the tenancy   was   created   earlier   to   the   date   of   mortgage.     The   tenancy 3 pleaded by the appellant is an oral tenancy.  At the time of grant of facility, third­party   valuers had confirmed that  the  Borrowers were staying   at   the   Secured   Asset.   The   Borrowers,   while   making representation   to   the   Bank,   have   not   claimed   that   any   tenant   is staying at the Secured Asset.  The tenancy claimed by the appellant is   an   after­thought   which   cannot   be   believed   in   the   facts   and circumstances of the case.  He prays for dismissal of the appeal. 8. We have carefully considered the submissions made at the Bar and perused the materials placed on the record. 9. As   noticed   above,   it   is   the   case   of   the   appellant   that   he   is   a tenant of the Secured Asset since 12.06.2012 and has paid advance rent   upto   17.12.2018.     The   documents   produced   by   the   appellant are   xerox   copies   of   the   rent   receipts.     However,   in   response   to   the notice   issued   under   Section   13(2)   of   the   SARFAESI   Act,   the Borrowers   have   sent   a   very   detailed   representation   wherein   they have   not   claimed   that   any   tenant   is   staying   at   the   Secured   Asset. The appellant has pleaded tenancy from 12.06.2012 to 17.12.2018. The rent receipt claiming  tenancy from 12.06.2012 is a xerox copy of 12.05.2013, which is after the date of creation of mortgage.  4 10. Procedural   mechanism   for   taking   possession   of   the   Secured Asset   is   provided   under   Section   14   of   the   SARFAESI   Act.     Section 17   of   the   SARFAESI   Act   provides   for   the   right   of   appeal   to   any person including the borrower to approach Debt Recovery Tribunal (DRT).     Section   17   has   been   amended   by   Act   No.   44   of   2016 providing for challenging the measures to recover secured debts (for short,   “the   Amendment”).     Under   the   Amendment,   possession   can be   restored   to   the   borrower   or   such   other   aggrieved   person.     This Amendment   has   come   into   force   w.e.f.   1 st   September,   2016.     This Court   in   Harshad   Govardhan   Sondagar   v.   International   Asset Reconstruction   Co.   Ltd.   &   Ors. 1   has   held   that   right   of   appeal   is available to the tenant claiming under the borrower.  In  Kanaiyalal Lalchand   Sachdev   v.   State   of   Maharashtra 2   this   Court   has   held that   DRT   can   not   only   set   aside   the   action   of   the   secured   creditor but   even   restore   the   status   quo   ante.     Therefore,   an   alternative remedy   was   available   to   the   appellant   to   challenge   the   impugned order   under   Section   17   of   the   SARFAESI   Act   even   before   the amendment   to   Section   17   of   the   SARFAESI   Act.     However,   given 1 (2014) 6 SCC 1 2 (2011) 2 SCC 782 5 that the instant appeal has been pending consideration before this Court   from   the   year   2016,   we   propose   to   examine   the   case   on merits   without   directing   the   appellant   to   avail   the   alternative remedy. 11. In   Harshad   Govardhan   Sondagar   (supra)   this   Court   has categorically held that if the tenancy claim is for any term exceeding one year, the tenancy can be made only by a registered instrument. It was held thus : “ 36. We may now consider the contention of the respondents that some of the appellants have not produced any document to prove that they are bona fide lessees of the secured assets. We find that in the cases before us, the appellants have relied on the written instruments or rent receipts issued by the landlord to the tenant. Section 107 of the Transfer of Property Act provides that a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made “only by a registered instrument” and all other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. 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 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.” 6 12. A Three­Judge Bench of this Court in  Bajarang Shyamsunder Agarwal v. Central Bank of India & Anr. 3 ,   after considering almost all   decisions   of   this   Court,   in   relation   to   the   right   of   a   tenant   in possession   of   the   secured   asset,   has   held   that   if   a   valid   tenancy under law is in existence even prior to the creation of the mortgage, such   tenant’s   possession   cannot   be   disturbed   by   the   secured creditor   by   taking   possession   of   the   property.     If   a   tenancy   under law comes into existence after  the creation of a mortgage but prior to issuance of a notice under Section 13(2) of the SARFAESI Act, it has   to   satisfy   the   conditions   of   Section   65­A   of   the   Transfer   of Property   Act,   1882.     If   a   tenant   claims   that   he   is   entitled   to possession of a Secured Asset for a term of more than a year, it has to be supported by the execution of a registered instrument.  In the said decision of this Court, it was clarified that in the absence of a registered instrument, if the tenant only relies upon an unregistered instrument   or   an   oral   agreement   accompanied   by   delivery   of possession,   the   tenant   is   not   entitled   to   possession   of   the   secured asset   for   more   than   the   period   prescribed   under   the   provisions   of the Transfer of Property Act. It was held thus: 3 (2019) 9 SCC 94 7 “ 24.1. If a valid tenancy under law is in existence even prior to the creation of the mortgage, the tenant’s possession cannot be disturbed by the secured creditor by taking possession of the property. The lease has to be determined in accordance with Section 111 of the TP Act for determination of leases. As the existence of a prior existing lease inevitably affects the risk undertaken by the bank while providing the loan, it is expected of banks/creditors to have conducted a standard due diligence in this regard. Where the bank has proceeded to accept such a property as mortgage, it will be presumed that it has consented to the risk that comes as a consequence of the existing tenancy. In such a situation, the rights of a rightful tenant cannot be compromised under the SARFAESI Act proceedings. 24.2. If a tenancy under law comes into existence after the creation of a mortgage, but prior to the issuance of notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65-A of the TP Act. 24.3. In any case, if any of the tenants claim that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the absence of a registered instrument, if the tenant relies on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under Section 107 of the TP Act. ” 13. It was further held that the Rent Act would not come to the aid of   a   “ tenant­in­sufferance ”   vis­à­vis   SARFAESI   Act   due   to   the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act.  It was held as follows:  “ 35. The   operation   of   the   Rent   Act   cannot   be extended   to   a   “ tenant­in­sufferance ”   vis­ à­vis   the SARFAESI   Act,  due  to   the   operation   of   Section   13(2) read   with   Section   13(13)   of   the   SARFAESI   Act.   A 8 contrary  interpretation would violate the intention of the   legislature   to   provide   for   Section   13(13),   which has   a   valuable   role   in   making   the   SARFAESI   Act   a self­executory   instrument   for   debts   recovery. Moreover,   such   an   interpretation   would   also   violate the   mandate   of   Section   35,   SARFAESI   Act   which   is couched in broad terms.” 14. In   the   present   case,   first   of   all   there   is   a   serious   doubt   as   to the   bona   fide   of   the   tenant,   as   there   is   no   good   or   sufficient evidence to establish the tenancy of the appellant.  According to the appellant,   he   is   a   tenant   of   the   Secured   Asset   from   12.06.2012. However, the documents produced in support of his claim are xerox copies   of   the   rent   receipts   and   the   first   xerox   copy   of   the   rent receipt   is   of   12.05.2013   which   is   after   the   date   of   creation   of   the mortgage.   It is pertinent to note here that the Borrowers have not claimed that any tenant is staying at the Secured Asset. At the time of   grant   of   facility,  third­party   valuers  had   also  confirmed  that   the Borrowers   were   staying   at   the   Secured   Asset.     Be   that   as   it   may. The appellant has pleaded tenancy from 12.06.2012 to 17.12.2018. This   is   not   supported   by   any   registered   instrument.   Further,   even according to the appellant, he is   a “ tenant­in­sufferance ”, therefore, he is not entitled to any protection of the Rent Act.  Secondly, even if 9 the   tenancy   has   been   claimed   to   be   renewed   in   terms   of   Section 13(13) of the SARFAESI Act, the Borrower would be required to seek consent of the secured creditor for transfer of the Secured Asset by way   of   sale,   lease   or   otherwise,   after   issuance   of   the   notice   under Section   13(2)   of   the   SARFAESI   Act   and,   admittedly,   no   such consent has been sought by the Borrower in the present case.   15. In   view   of   above,   we   do   not   find   any   merit   in   these   appeals which are accordingly dismissed.           …………………………………J.          (S. ABDUL NAZEER)      …………………………………J.          (KRISHNA MURARI) New Delhi; August 17, 2021. 10