ORDER
P.S. Narayana, J.
1. Heard Sri B.Shanker, learned Counsel representing the writ petitioner and Sri B.S.Prasad, learned Counsel representing the respondents.
2. This Court ordered notice before admission on 01.11.2007 and granted status quo for a limited period, which is being extended from time to time.
3. The writ petition is filed for issuance of writ of mandamus directing the respondents not to evict the petitioner from the Flat bearing No. 101, H. No. 1-6- 16/6/B, situated at Plot No. 11, S. No. 228, Sri Santoshi Nilayam, Phanigiri Colony, Vanasthalipuram, Hyderabad and to pass such other suitable orders.
4. Sri B.Shanker, learned Counsel representing the writ petitioner had taken this Court through the contents of the affidavit filed in support of the writ petition and would maintain that in the light of the view expressed by the learned Judge of the Karnataka High Court in Hutchison Essar South Ltd. v. Union Bank Of India AIR 2008 Kant 14, at the best symbolic possession can be taken, but actual possession cannot be taken. The learned Counsel further contended that there is no privity of contract between the respondent Bank and the petitioner and that no notice had been given and no explanation had been called for. The learned Counsel strongly relied upon Section 31 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Act' for the purpose of convenience). The learned Counsel also would maintain that it is doubtful whether the mortgage is a possessor mortgage or a simple mortgage. Whatever the reason may be, except taking symbolic possession, actual possession cannot be affected, even if the scope, ambit and object of the Act to be carefully scrutinized.
5. On the contrary, Sri B.S.Prasad, learned Counsel representing the respondent Bank would maintain that this is a case where the tenant is said to have occupied the premises long after the security had been given. The learned Counsel also would maintain that the view expressed by the Karnataka Court in Hutchison Essar South Ltd's case (1st supra) cannot be said to be binding precedent, especially, in the light of the view expressed by the Division Bench of this Court in W.P. No. 1382 of 2008 and also the view expressed by the Apex Court in Transcore v. Union Of India : AIR2007SC712 . The learned Counsel placed strong reliance on the decision of the Kerala High Court in Business India Builders and Developers Ltd. v. Union Bank of India : AIR2007Ker114 .
6. The learned Counsel for the respondent Bank had drawn attention of this Court to Sections 31(e) and 35 of the Act and also Rule 9 of the Security Interest (Enforcement) Rules, 2002 as well. The learned Counsel would maintain that the bona fide tenants, at the best, may invoke the alternative remedy available under Section 17 of the Act. The learned Counsel would also maintain that such tenants, who are said to be in possession, need not be put on any notice at all even as per the provisions of the Act. The learned Counsel would conclude that procedure had been followed as ordained by the provisions of the Act and hence the action of the respondent Bank cannot be found fault.
7. Heard the learned Counsel and perused the entire material available on record.
8. It is stated that the petitioner is the tenant of the premises Flat bearing No. 101, H. No. 1-6-16/6/B, situated at Plot No. 11, S. No. 228, Sri Santoshi Nilayam, Phanigiri Colony, Vanasthalipuram, Hyderabad (hereinafter called as scheduled property) from the month of December, 2006 on the monthly rent of Rs. 1,500/- and he paid an amount of Rs. 7,500/- as advance to his flat owner Sri Tammane Ratna Kumar. He submits that he is paying the rents regularly without any default till date and the tenancy is oral.
9. The petitioner further submits that he hails from a traders community and that he is the native of Sethenapally village and Mandal, Guntur District. He migrated to Hyderabad five years ago and commenced the medical business in the ground floor of the scheduled property i.e., in the flat bearing No. G-1 in the name and style of M/s.Vishnave Pharma. He is doing the said business since five years taking the assistance of his brother-in-law Sri V. Ramakoteshwer Rao, who also resides in the same flat.
10. The petitioner submits that on 16-10-2007, the second respondent came along with labourers and demanded that he should vacate and handover the said flat stating that the owner of scheduled property had raised housing loan from the first respondent by mortgaging the scheduled property and failed to repay the same. The second respondent insisted that he should vacate and handover the possession of the said flat immediately otherwise he threatened that he will remove all the household articles from the said flat and put them on the road. The second respondent further stated that he has every power to remove/evict him under the Act.
11. The petitioner further submits that himself and his family members were totally disturbed and were put to lot of embracement and mental agony. The petitioner tried to contact his landlord on mobile but he was not in reach. He prayed the second respondent to give him sometime to enable him to look for another flat. Then the second respondent insisted him to give a letter in writing. He informed that he is not good at English and the second respondent himself drafted a letter and took his signature on that and made an endorsement on the office copy 'received and granted time till 31-10-2007 to take physical possession' of the scheduled property.
12. The petitioner further submits that the next day i.e., on 17.10.2007 he contacted his owner, who in turn informed that he has no privity of contact with the respondents and he is not due any amount. The second respondent is a recovery agent of the first respondent. The flat owner further stated that no notice had been served to him by the respondents till date and assured him not to bother about the second respondent.
13. The petitioner further submits that on 30-10-2007 at about 10.00 AM the second respondent called him and informed him that he will be coming on 01-11- 2007 to take possession of the scheduled property and asked him to keep vacant the possession of the scheduled property or otherwise he threatened him to evict him with the assistance of the labourers.
14. Further specific stand had been taken that the first respondent is a statutory body and bound to implement the prevailing laws in regard to the recovery and eviction. The first respondent cannot resort to such method of appointing agencies for recovery of the loan by forcibly evicting the petitioner from the schedule property without following due process of law. In the counter-affidavit filed by the second respondent, the Manager (Legal) of the first respondent Bank, the material allegations had been denied and specific stand had been taken that the writ petition is not maintainable and the same is liable to be dismissed. The petitioner has no cause of action to approach this Court in exercise of the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. The petitioner has alternative and efficacious remedy as envisaged under Section 17 of the Act and if at all the petitioner is aggrieved he has to file the application under Section 27 of the Act and he cannot circumvent the procedure by approaching this Court. The petitioner had suppressed the material facts and approached this Court with unclean hands in collusion with the owner of the subject flat who had mortgaged the subject flat much prior to the alleged tenancy set up by the petitioner. It is admitted that the petitioner is the tenant of the premises bearing Flat No. 101, House No. 1-6-16/6/B, situated at Plot No. 11, Survey No. 228, Sir Santhoshi Nilayam, Phanigiri Colony, Vanasthalipuram, Hyderabad. This respondent is not aware of the alleged tenancy from the month of December, 2006 and so also the quantum of rent. The petitioner is put to strict proof of the alleged tenancy between himself and the owner Sri T.Ratna Kumar. It is also stated that the second respondent is not aware of the business activity of the petitioner and also of his nativity. The second respondent is not aware of the alleged business being carried on by the petitioner in the ground floor of the same complex under the name and style of 'Vishnavi Pharma' for the last five years by taking assistance of his brother-in-law Sri B.Rama Koteswara Rao. The second respondent is not aware of the actual residence of Sri B.Rama Koteswara Rao, who is stated to be residing in one of the flats in the same complex.
15. It is true that the second respondent went to the subject flat along with other bank officers and requested the petitioner to vacate and handover the subject flat being secured creditor and being the authorized officer of the bank and informed him that the subject flat was mortgaged by his landlord in respect of the housing loan availed by him. But it is false to allege that the respondents have threatened the petitioner that his household articles will be removed and put them on road. It is true that the respondents have informed the petitioner that the bank has every right to seek removal and evict the petitioner under the provisions of the Act through due process of law.
16. It is false to state that the petitioner and his family members were discharged and were put to embarrassment and mental agony. In fact there was no need at all either to discharge or to face embarrassment, as the petitioner is a mere tenant and he has to fully abide by law in peacefully delivering the property to the respondents, who are the secured creditors, as the dutiful citizens. It is true that the petitioner requested the second respondent to give sometime to look after for alternative rented premises and accordingly the second respondent requested to give a letter to that effect. It is true that the petitioner himself requested the second respondent to draft a letter and that as requested by the petitioner the same was drafted by the second respondent and signed by the petitioner on his own. The second respondent considering the request of the petitioner granted time till 31st October, 2007 which was quite reasonable time.
17. The allegations that the petitioner contacted the owner and that the petitioner was informed that has no privity of contract with the respondents and that he was not due any amounts are all false and at any rate they have no bearing on the writ petition. It is false to allege that the second respondent is a recovery agent of the first respondent. The very cause title would go to exhibit that the second respondent is an employee of the first respondent designated as Legal Manager (Risks and Collection), which is a department in the first respondent bank. The second respondent is also authorized officer designated by the bank, under the provisions of the Act and by virtue of his employment as well as Special Power of Attorney dated 27-07-2006. It is false to allege that the flat owner stated that no notice had been served upon him by the respondents and that he has assured him not to bother about the second respondent. It is true that on 30-10-2007 the second respondent called the petitioner and requested him to deliver possession of the property, which is lawful act and which completely discharges legal obligations of the petitioner. It is true that the first respondent is a statutory body appointed to implement prevailing laws in regard to the recovery and eviction. It is also equal responsibility of the petitioner being a law abiding citizen to uphold and implement the laws and further cooperate in the matter of enforcement of the rights of the persons in their favour, which are created by contracts of law. It is false to allege that the first respondent appointed some agencies for recovery of loans and eviction from the secured assets without following due process of law.
18. Certain further averments were made in paragraphs 11 to 13 of the counter affidavit.
19. In paragraph No. 14 of the counter affidavit, it is stated that the petitioner is fully aware of the lawful rights of the first respondent as secured creditor over the scheduled property, in which the security interest is created in favour of the first respondent by the landlord of the petitioner. It is stated that the first respondent initiated steps under Section 13(2) of the Act and issued notices dated 26-07-2007 which were acknowledged by the landlord of the petitioner; that despite receiving the notices, his owner did not liquidate the debt and subsequently the second respondent had taken further measures under Section 13(4) of the Act and that when the second respondent went to the secured asset to take possession, the petitioner requested him to consider time till 31st October, 2007 so as to vacate the premises and to deliver possession of the property. The second respondent pursuant to the rights conferred under the Act directly went to the scheduled premises with the hope that there will not be any resistance from the mortgagor or the person in possession of the property. The second respondent could have obtained necessary orders from the Chief Metropolitan Magistrate or the District Collector to assist the respondent bank in taking over physical possession of the secured asset i.e., subject flat. The petitioner agreed to deliver possession by seeking time, which was considered by the second respondent, which act itself exhibit the generosity of the bank in considering reasonable time to the petitioner, who is not otherwise entitled to seek for time to vacate the premises and who is attempting to interfere into the rights vested in the first respondent bank probably in collusion with the mortgagor. The petitioner has evidently chosen to invoke extraordinary jurisdiction of this Court by circumventing procedure when alternate and efficacious remedy is envisaged under the Act. In fact the petitioner even cannot redress any grievance as against the action of the first respondent bank under the Act. The mortgage was created by the landlord of the petitioner on 31-07-2006 and the alleged tenancy of the petitioner in respect of the subject property is from the month of December, 2006. Hence, the petitioner cannot be presumed to claim any better rights over the rights of the first respondent.
20. These are the respective stands taken by the parties in the affidavit filed in support of the writ petition and also in the counter-affidavit.
21. Section 17 of the Act reads as hereunder:
17. Right to appeal:(1) Any person (including borrower), aggrieved by any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, may prefer an appeal to the Debt Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken.
(2) Where an appeal is preferred by a borrower, such appeal shall not be entertained by the Debts Recovery Tribunal unless the borrower has deposited with the Debts Recovery Tribunal seventy-five percent of the amount claimed in the notice referred to in Sub-section (2) of Section 13: Provided that the Debts Recovery Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.
(3) Save or otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.
Section 35 of the Act reads as hereunder:
The provisions of this Act to override other laws:- The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
Further strong reliance was placed on Section 31(e) of the Act and the same reads as hereunder:
31. Provisions of this Act not to apply in certain cases:
(a) ...
(b) ...
(c) ...
(d) ...
(e) Any conditional sale, hire-purchase or lease or any other contract in which no security interest has been created;
(f) ...
(g) ...
(h) ...
(i) ...
22. Reliance was placed on the decision of the Division Bench of this Court in W.P. No. 1382 of 2008, wherein the Division Bench observed as hereunder:
In the circumstances, to protect the interest of the petitioner, it is appropriate to direct the petitioner to file an application within one week from today before the Bank and upon filing of such application, the Bank shall furnish a copy of the operative portion of the order within a period of one week so that the petitioner can avail the remedy of appeal. After receipt of copy of operative portion of the order from the Bank, the petitioner shall obtain appropriate order from the appellate authority within a period of one month. Till then, the petitioner shall not be disturbed.
Subject to the above, the writ petition is dismissed. There shall be no order as to costs.
23. In TRANSCORE's case (2nd supra), the Supreme Court observed as hereunder:
50. The short question under this head is whether recourse to take possession of the secured assets of the borrower under Section 13(4) of the NPA Act comprehends the power to take actual possession of the immovable property.
51. Mr. N.C. Sahni and Mr. Pankaj Gupta, learned advocates appearing on behalf of the respective borrowers submitted that Section 13(4) of the NPA Act empowers the secured creditor to take possession of the secured immovable assets of the borrower on expiry of sixty days and notice served under Section 13(2) of that Act. It is pointed out that in many cases, the banks/FIs. have taken actual physical possession whereas in other cases they have taken only a symbolic possession. Learned advocates submitted that in Kalyani Sales Co., the High Court has rightly held that if physical possession is taken on expiry of sixty days, the remedy of application under Section 17 of the NPA Act by the borrower would become illusory and meaningless as the borrower or the person in possession would be dispossessed even before adjudication of the objections by the tribunal. Learned advocates further submitted that under Section 13(8), the bank/FI is prevented from selling the secured assets, if the dues of the secured creditor with all costs, charges and expenses are tendered to the secured creditor at any time before the date fixed for sale. Learned advocates pointed out that under Rule 8(1) of the 2002 Rules, a secured creditor is empowered to take possession as per notice appended in terms of Appendix IV. That notice cautions the borrower not to deal with the property. Learned advocates submitted that notice in terms of Rule 8(1) of the 2002 Rules operates as attachment. It contemplates a symbolic possession. Learned advocates submitted that actual physical possession of immovable assets can be taken under Rule 8(3), in cases where there is a vacant plot or a property which is lying unattended, but where the immovable property is in actual physical possession of any person, the person in possession cannot be dispossessed by virtue of a notice under Rule 8(1); that actual physical possession is to be delivered only after confirmation of sale under Rule 9(6) read with Appendix V under which the authorized officer is empowered to deliver the property to the purchaser free from all encumbrances in terms of Rule 9(9) of the 2002 Rules. Learned advocates, therefore, submitted that the High Court was right in holding that the borrower or any other person in possession of the immovable property cannot be physically dispossessed at the time of issuing notice under Section 13(4) of the NPA Act so as to defeat the adjudication of his claim by the DRT under Section 17 of NPA Act, and that, physical possession can be taken only after the sale is confirmed in terms of Rule 9(9) of the 2002 Rules.
52. We do not find any merits on the above contentions for the following reasons. The word possession is a relative concept. It is not an absolute concept. The dichotomy between symbolic and physical possession does not find place in the Act. As stated above, there is a conceptual distinction between securities by which the creditor obtains ownership of or interest in the property concerned (mortgages) and securities where the creditor obtains neither an interest in nor possession of the property but the property is appropriated to the satisfaction of the debt (charges). Basically, the NPA Act deals with the former type of securities under which the secured creditor, namely, the bank/FI obtains interest in the property concerned. It is for this reason that the NPA Act ousts the intervention of the courts/tribunals.
24. In Business India Builders And Developers' Ltd case (3rd supra), the Division Bench of the Kerala High Court observed as hereunder:
4. We may at the outset point out that respondents 1 and 2 have produced Annexure-R2 Declaration dated 20-1-1995 executed by the borrower in favour of the Bank. There is a specific clause in Annexure-R2 which reads as follows: We hereby agree and undertake not to mortgage, charge, encumber, lease, dispose of or deal with the property mortgaged by me/us/the company to cover the guarantee during the continuance of the said facilities to M/s. Anupam by the bank.
Facts would indicate that contrary to the above mentioned stipulation in Annexure-R2 the petitioner was inducted as a tenant in the premises and now he has taken up the stand that he cannot be evicted under the provisions of the Securitisation Act but only under the provisions of the Kerala Buildings (Lease and Rent Control) Act. Supreme Court in Mardia Chemicals case has upheld the validity of the Securitisation Act and the right to proceed against secured assets.
5. Sections 35 and 37 of the Securitisation Act in our view have got overriding effect over the Kerala Buildings (Lease and Rent Control) Act. The above mentioned provisions are extracted hereunder for easy reference:
35. The provisions of this Act to override other laws:- The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
37. Application of other laws not barred:- The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1958 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.
Section 35 specifically states that it would override other laws. Further Section 37 states that the provisions of the Securitisation Act shall be in addition to and not in derogation of certain acts mentioned therein. Laws which are not barred but in addition to the Securitisation Act has been enumerated in Section 37. A Division Bench of the Court in Shameem v. City Police Commissioner 2005 (4) KLT (SN) page 70 wherein this Court has taken the view that the Securitisation Act has got overriding effect over other laws and tenant cannot claim possession over the mortgaged property. This Court has also had occasion to consider the question as to whether the provisions of the State Financial Corporation Act would prevail over the provisions of any other laws including the provisions of Kerala Buildings (Lease & Rent Control) Act. A Division Bench of this Court in Antony v. RFC took the view that the provisions of the State Financial Corporation Act would prevail over the provisions of any other laws including the provisions of the Kerala Buildings (Lease and Rent Control) Act by virtue of Section 46-B of the State Financial Corporation Act, 1951. Section 46-B also operates in the same plane compared to Section 35 of the Securitisation Act. The principle laid down in the above mentioned decisions would apply to the facts of this case. We are therefore of the view that the Securitisation Act has got overriding effect over the Kerala Buildings (Lease and Rent Control) Act and parties are governed by the Securitistion Act and not by the Rent Control Act.
6. We are not impressed by the arguments of the counsel for the petitioner that the encumbrance enumerated in Rule 9(9) would not take in the occupation of the tenant. The word encumbrance cannot be given a restricted meaning 'Encumbrance' means a liability which burdens the property, for example, lease, mortgage, easement, restriction, covenant, rent, charge etc. Encumbrance which can be carved out of ownership, generally are securities, leases, servitudes, trusts etc. It is generally a burden or charge upon the property. Lease is therefore an encumbrance over the property. In any view the borrower is bound by the terms and conditions stipulated in Annexure R2 dated 20.1.1995, by which he had undertaken that he would not lease out the property. Contrary to the said stipulation the tenant was put in possession and therefore by virtue of Securitistion Act there is no necessity of the Bank resorting to the provisions of the Rent Control Act for evicting the tenant. The authorized officer is to deliver the property to the purchaser free from encumbrances in terms of Rule 9(9). Occupants are not to be physically dispossessed at the time of issuing notice under Section 13. The physical possession can be taken by the Bank by following the procedure laid down in Section 14 or after the sale is confirmed. In this connection we may refer to the Bench decision of the Punjab and Haryana High Court in Kalyani Sales Co. v. Union of India . In view of the above mentioned circumstances we find no error in the judgment of the learned single Judge to be interfered by us in this appeal. Writ appeal therefore lacks merit and the same is dismissed.
25. In Hutchison Essar South Ltd's case (1st supra), learned Judge of Karnataka High Court while dealing with Sections 13,14,17 and 35 of the Act and also Sections 69,69A, 106 and 107 of the Transfer of Property Act, 1882 and certain provisions of the State Financial Corporation Act as well laid down that the banking institution can take only symbolic possession of the premises in question from a tenant.
26. The learned Counsel for the respondents also placed reliance on Mahek Feed Industries v. Amrutlal Kataria AIR 2007 AP 230, Trade Well v. Indian Bank 2007 CriLJ 2544 And Ms.Yukta Mookhey v. Bank of India 0065/2006 : 2006(3)BomCR26
27. As can be seen from the facts of the case, the writ petitioner appears to have entered possession of the property long after the property had been given as security by the owner in favour of the respondent Bank. Even otherwise, in the light of the provisions of the Act and also certain of the Rules, which had been relied upon, this Court is of the considered opinion that no positive direction as such can be granted in this writ petition. However, liberty is given to the petitioner to invoke appropriate remedy as specified under Section 17 of the Act.
28. Accordingly, with the above observation, the writ petition is dismissed. There shall be no order as to costs.