Unregistered Tenancy Claims Fail Against Secured Creditors Under the SARFAESI Act: Tenant Deemed in Sufferance
- REEDLAW
- Nov 25, 2024
- 3 min read
DRAT Dismissed the Appeal, Holding Unregistered Tenancy Claims Invalid Against Secured Creditors Under the SARFAESI Act, With the Tenant Deemed a Tenant in Sufferance.
The Debts Recovery Appellate Tribunal (DRAT), Kolkata Bench headed by Justice Anil Kumar Srivastava (Chairperson) reviewed an appeal and held that a tenant claiming protection under tenancy laws must substantiate possession through a registered lease agreement or unequivocal proof of tenancy; in its absence, the SARFAESI Act overrides tenancy rights, rendering claims based on unregistered agreements or rent receipts untenable. It further underscores that tenants in sufferance hold no legal rights and are akin to trespassers.
The Debts Recovery Appellate Tribunal (DRAT) dealt with an appeal filed by Sri Munilal Mahato against an order dated October 5, 2023, passed by the Debt Recovery Tribunal (DRT)-3, Kolkata, in S.A. No. 806 of 2023. The appellant, claiming tenancy rights over the secured asset—a flat at J.C. Roy Chowdhury Tower, Belghoria—asserted that he was inducted as a tenant by the erstwhile owners under an unregistered leave and license agreement dated January 23, 2017, for a monthly rent of ₹3,000. The property was later sold to the borrower, Susanta Kumar Dolui, who mortgaged it with Aditya Birla Housing Finance Ltd. (Respondents 1 and 2). Proceedings under Section 14 of the SARFAESI Act were initiated, leading to an order for physical possession of the property by the Chief Judicial Magistrate (CJM), North 24 Parganas, Barasat. Challenging this, the appellant filed S.A. No. 806 of 2023 and sought interim relief through I.A. No. 2602 of 2023, which was disposed of by the DRT. Dissatisfied, the appellant preferred the instant appeal.
The appellant contended that he had been a tenant since 2017, prior to the mortgage created in 2021. He relied on rent receipts, the leave and license agreement, and an interim injunction passed in Civil Suit No. 491 of 2022 in his favour. He argued that the agreement, though unregistered, was valid under the West Bengal Premises Tenancy Act, 1997, as the rent was less than ₹10,000. He further cited Vishal N. Kalsaria v. Bank of India and Others, REEDLAW 2016 SC 01203 to assert that his tenancy rights could not be overridden by SARFAESI proceedings.
The respondents countered that the appellant failed to produce a registered lease deed, which is mandatory under Section 107 of the Transfer of Property Act for leases exceeding one year. They relied on Bajarang Shyamsunder Agarwal v. Central Bank of India and Another, REEDLAW 2019 SC 09202, asserting that unregistered agreements or oral tenancies do not confer legal protection under the SARFAESI Act. They argued that the appellant’s possession was unsubstantiated, and the interim injunction in the civil suit had no bearing on the secured creditors as they were not parties to the suit.
The DRAT observed that the appellant’s reliance on an unregistered lease agreement rendered his claim untenable under the Transfer of Property Act and SARFAESI Act precedents. It noted that no additional evidence, such as payment of property taxes, electricity bills, or enhanced rent as required under Section 18 of the West Bengal Premises Tenancy Act, was submitted to substantiate the tenancy. The Tribunal further held that the appellant’s tenancy rights, if any, were extinguished after one year of the unregistered agreement, relegating him to the status of a "tenant at sufferance," akin to a trespasser as per R.V. Bhupal Prasad v. State of A.P. (1995) 5 SCC 698.
The DRAT also found no merit in the appellant's reliance on the civil suit, as neither the secured creditor nor the borrower was a party to that litigation. The order of the CJM under Section 14 of the SARFAESI Act was deemed lawful, as it complied with procedural requirements and recorded satisfaction on all necessary grounds.
Based on these findings, the DRAT dismissed the appeal, upholding the DRT’s order and affirming that the appellant had no valid tenancy rights to obstruct the possession proceedings initiated by the secured creditor under the SARFAESI Act.
Mr. Samrat Mukherjee, Advocate represented the Appellant.
Mr. Abhishek Guha and Ms. Ritika Pal, Advocates appeared for the Respondent.
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