IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI
DATED THE 21ST OCTOBER, 2008
PRESENT: HON’BLE MR. JUSTICE T.V. MASILAMANI
CHAIRPERSON
RA(SARFAESI)-113/2008
(SA-178/2007 – DRT-III, Chennai)
BETWEEN –
M/s. Kotti Finance Ltd.,
No.180-181, Gandhi Road,
Kanchipuram Town,
Rep. by its Director,
Mr.S. Kamakotti
…. Appellant
AND
Indian Bank,
Circle Office,
No.510-511, Gandhi Road,
Kanchipuram,
Rep. by its Authorised Officer
…. Respondent
Counsel for Appellant – M/s. Prakash Goklaney, Rishi S. Ahuja & Harshad P. Goklaney
Counsel for Respondent Bank – M/s. Aiyar & Dolia
O R D E R
1. The Appellant/Third party has filed this Appeal challenging the impugned Order passed by the DRT-III, Chennai, in SA-178/2007 on 10.1.2008.
2. The facts leading to the filing of this Appeal may be set out briefly as under :-
The Respondent Bank sanctioned the loan facilities by way of Overdraft and OCC limit to M/s. Lakshmi Vilas Silks Ltd. against collateral security of movable properties for which equitable mortgage of land and building bearing Door Nos.186C (New No.181) and 186B (New No.180) situated at Gandhi Road, Kanchipuram, was also created in favour of the Bank by the borrower. The Directors of the principal borrowers stood as guarantors for the due repayment of the loan. Since the account was out of order, the Bank invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter called as SARFAESI Act) and issued the demand notice dated 26.12.2002, under Section-13(2) in the said Act and also took physical possession of the 1st and 2nd floors of the building and symbolic possession of the ground floor on 7.1.2005. Since the borrowers have not repaid any amount, the secured property was sold by the Bank on 16.10.2006, and the same was also confirmed in favour of the highest bidder on 17.10.2006. The Bank issued notice to the borrowers to hand over physical possession, but the Appellant, who is third party filed the said SA contending that the Appellant institution is a tenant of the ground floor in the said mortgaged property. The Respondent Bank filed a detailed Counter Affidavit. After hearing both sides and upon perusal of the material records, Ld. PO dismissed the Application filed by the Appellant. Hence the Appeal.
3. Heard Mr. Prakash Goklaney, Ld. Counsel appearing for the Appellant and Mr. Subramaniam, Ld. Counsel appearing for the Respondent Bank.
4. Ld. Counsel for the Appellant has putforth the following contentions :-
The Appellant is a Public Limited Company inducted into possession of the ground floor in the mortgaged property from the year 1995 under a lease deed dated 9.1.1991, and has been in occupation of the same, carrying on business including that of provision of safe deposit lockers to its customers. The Respondent Bank is now attempting to evict the Appellant in the guise of evicting the debtor and such an action on the part of the Respondent Bank is illegal as also an abuse of process of law. The DRT failed to note that the law of evidence is not provided in so far as the proceedings before the DRT is concerned. The Appellant is a tenant entitled to the protection under the Tamil Nadu Buildings (Lease and Rent Control) Act, and there need not be a lease deed for the purpose of invoking the provisions under the said Act. Similarly the DRT erred in stating that the lease was not in accordance with Section-65A of the Transfer of Property Act, which is not applicable to cases covered by the Rent Control Act. Similarly the finding rendered by the DRT that the action on the part of the Appellant was barred by limitation has no legal basis for the reason that only when the Respondent Bank threatened to break open and take physical possession, the Appellant was constrained to institute the said proceedings. Even otherwise, the delay if any, could have been condoned by the DRT as there was sufficient cause for such delay.
5. In the above circumstances, the points for consideration are as follows :-
1) Whether the Appellant being a third party to the transaction is entitled to claim tenancy rights over the ground floor of the mortgaged property ?
2) Whether the impugned Order passed by the DRT has to be set aside as prayed for ?
The Points :
6. It is common ground that the Respondent Bank had taken measures under Sections-13(2) & 13(4) of the SARFAESI Act, against the principal borrower M/s. Lakshmi Vilas Silks Ltd., and the Directors of the Company, who stood as guarantors for the due repayment of the loan amount and in the process the secured property was taken possession. Similarly it is not in dispute that the ground floor of the secured property was taken by way of symbolic possession by the Bank and in this context the Appellant has putforth the claim in the said Application in SA-178/2007 before the DRT that they are in possession of the ground floor as a tenant under the principal borrower. In this respect, it is relevant to note that some of the Directors of the principal borrower Company are the Directors of the Appellant institution also.
7. In the above circumstances, it has become necessary to consider whether the Appellant has proved satisfactorily that the institution is a statutory tenant of the 1st floor of the mortgaged premises? The Appellant has placed strong reliance on the unregistered document so as to claim the status of a statutory tenant. In this connection, Ld. Counsel for the Respondent Bank has cited the decision, Duraisamy Naidu & Ors. Vs. Ramakrishnan & Ors.- [(2007) 1 MLJ 424], wherein the principle of law is laid down that where the lease deed is executed for a period of more than one year, it has to be mandatorily registered as per Section-17(1)(d) of the Indian Registration Act, and that such an unregistered document would be inadmissible in evidence. Hence it goes without saying that the unregistered document relied on by the Appellant cannot be pressed into service for any purpose and therefore, this Tribunal holds that the finding rendered by Ld. PO on this aspect of the matter has to be confirmed.
8. Though the Appellant has produced Income-tax returns of the Appellant Company with reference to financial years 1997, 1998 and 1998-1999 to show that even prior to the loan transaction between the Respondent Bank and the borrower Company, the Appellant was inducted into possession of the premises as a tenant, this Tribunal is inclined to accept the contentions of the Respondent’s Counsel that the said documents are self-serving in nature and that therefore, no reliance can be placed upon them so as to jeopardise the valuable rights of the Bank. In this context, Ld. Counsel for the Respondent Bank has cited the decision M/s. Sree Lakshmi Products Vs. State Bank of India [2007 (2) CTC 193], laying down the proposition of law that if a claim is made on the basis of an unregistered document so as to affect the rights of the secured creditor, such claimant is not a protected tenant and that the continuance of possession of such a claimant is contrary to the provision of Section-65A of the Transfer of Property Act. Hence the Ld. Counsel for the Respondent has argued rightly in my opinion that the Appellant has no right to continue in possession of any portion of the secured property.
9. On the other hand, Ld. Counsel for the Appellant has placed strong reliance upon the decision Hutchison Essar South Ltd. Vs. Union Bank of India & Anr. [AIR 2008 Karnataka 14] in support of his contention that non-registration of lease agreement is not fatal and that irregularities in inducting the Appellant into possession of the premises make the occupier trespasser of the same. However, since the said decision was rendered by the Ld. Single Judge of the High Court of Karnataka at Bangalore, inasmuch as the ratio laid down by the First Bench of the Madras High Court referred supra is binding on this Tribunal, I am unable to endorse the view projected by the Ld. Counsel for the Appellant on the basis of the said decision and it follows that the principle of law enunciated therein cannot be made applicable to the facts of the present case.
10. Further as has been rightly pointed out by the Ld. Counsel for the Respondent Bank, the conduct of the Appellant would also assume importance while disposing of this Appeal. The Appellant filed a Civil Suit in the Munsif Court at Kanchipuram in OS No.494/2006 and obtained interim injunction in IA-1240/2006 and after contest by the Respondent Bank, the injunction Order was vacated on merits. Similarly, the said Order became final as the same was not challenged by the Appellant in any other forum. Further the Directors of the Appellant Company, some of whom are Directors in the borrower Company did not disclose any such tenancy agreement between the borrower Company and the Appellant Company at the time of entering into the loan transaction with the Respondent Bank and therefore, this Tribunal is of the considered view that if really the Appellant Company was inducted into possession of the ground floor as a tenant even prior to the loan transaction, in the course of normal conduct, the Directors of the borrower Company, who are also Directors of the Appellant Company should have revealed such tenancy agreement to the Bank. But on the other hand, in this case, the borrower Company did not come forward to putforth any contention to support the plea of tenancy projected by the Appellant Company and it follows necessarily that such conduct on the part of the Directors of both the Companies would go a long way to show that the plea of tenancy set up by the Appellant Company is purely an after thought.
11. Further, in support of the plea of taking possession of the secured property, the Respondent Bank filed the Memo in this Appeal along with Panchanama recorded on 15.6.2008, 11.6.2008 and 17.1.2005, which reveal that a portion of the ground floor wherein safety lockers are embedded to earth, had alone been taken possession by the Bank symbolically and the remaining portion of the ground floor as well as the other two floors of the secured building had been physically handed over to the Bank as per the Panchanama produced in this Tribunal. In any view of the matter, both on facts and in law, the Appellant miserably failed to establish its claim of tenancy over the second floor of the secured property. Considering the above facts and circumstances in the light of the principles of law enunciated in the said decisions referred supra, this Tribunal is of the considered opinion that there is no illegality or irregularity pointed out in the impugned Order so as to interfere with the same and it is therefore confirmed.
12. For the aforesaid reasons, the Appeal is dismissed with cost of Rs.5000/- and consequently the impugned Order passed by the DRT-III, Chennai, in SA-178/2007 dated 10.1.2008, is confirmed. The cost of Rs.5000/- is ordered to be paid to The Spastics Society of Tamil Nadu, Taramani Road, Chennai-600 113. Cost Memo is directed to be filed within two weeks.
(Dictated to PS, transcript corrected and order pronounced & signed by me in open court today 21.10.08)
[ JUSTICE T.V. MASILAMANI ]
CHAIRPERSON
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