Sree Lakshmi Products vsState Bank of India, Red Fields Branch, Coimbatore

Judgment of Madras High Court in W.P.No.10355/2005 Dated 23.02.2007 

Reported in 2007 (2) CTC 193

Sree Lakshmi Products represented by its Partner, S.Lakshmi Prabha 

The Bank is entitled to take actual possession of the secured assets from the borrower or from any other person in terms of Sec 13 (4) of the Act.

Any transfer of secured assets after taking possession of the same by the Bank shall vest in the transferee all rights in relation to the secured assets as if the transfer was made by the owner of such assets.

Any party aggrieved by such dispossession will have to take recourse to approaching the DRT under Sec 17(4) of the Act.

If the party is dispossessed, not in accordance with the provisions of the Act, then DRT is entitled to put the clock back by restoring the status quo ante.

Where the taking of possession comes in conflict with the local law (like Rent Control Act), the provisions of Sec 13(4) shall override the local law.

Sec 13(13) of the Act operates as an attachment/injunction restraining the borrower from disposing of the secured assets and, therefore, any tenancy created after such notice would be null and void.

Any tenancy created by the mortgagor after the mortgage in favour of the Secured Creditor in contravention of Sec 65 A of the Transfer of Property Act would not be binding on the Bank and in any event such tenancy rights shall stand determined once action under Sec 13(4) has been taken by the Bank.

When tenancy rights prior to the creation of the mortgage is claimed and such tenancy is disputed by the Bank, the person claiming tenancy rights has to approach DRT by way of an application under Sec 17 of the Act to establish such rights.