Tenant cannot be evicted by using SARFAESI Act: SC

Supreme Court has held that the tenant cannot be evicted by using the provisions of SARFAESI Act, 2002. The Apex Court has held in Vishal N. Kalsaria Vs. Bank of India, that provisions of SARAFESI act, cannot override the provisions of Rent Control Act.

Justice V. Gopala Gowda & Justice Amitava Roy said that Section 35 of the SARFAESI Act which is non-obs ante clause cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act.

The appellants in the present case were the occupants of the property which was mortgaged by the landlord to the bank. The landlord defaulted the payment and the account became NPA. The bank moved the DM application before the magistrate to take the physical possession and the same was allowed. In the meantime, the appellant approached the civil court for the injunction and the interim order was granted by restraining the landlord for obstructing the possession.

The appellant moved an application as interveners before the magistrate to stay the execution of his earlier order, but the judge rejected the application while relying on ‘Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd case. The Magistrate held that when the bank takes action under SARFAESI Act, then it is not open for the Court to grant an injunction under Rent Control Act. The magistrate further held that injunction issued in any rent suit cannot be binding upon the Bank. The tenants approached Supreme Court.

The Supreme Court held that a landlord cannot be permitted to do the act indirectly what Rent Control Act prohibits. The Apex Court while rejecting the contention of the various bank has observed that SARFESI Act cannot override the provisions of Rent Control Act. The entire scheme of rent control acts will become useless if the eviction of the tenants is allowed through SARFAESI Act.

The court further observed that tenants would be left wholly to the mercy of their landlords and in the fear that the landlord may create the security interest of the place which is on tenancy with the banks and subsequently will default the payment to evict them through SARFAESI Act.

The decision rendered by this court in Harshad Govardhan Sondagar has not understood in its entirety. It cannot be construed that the provisions of the SARFAESI Act can override the provisions of the Rent Control Act. The Court said few sentences have been picked up from the judgment and used, without any attempt to understand the decision in its entirety’.

Saurav Goyal, Advocate in Chandigarh High Court said that the tenants can only be evicted under the provisions of Rent Control Laws after following due process of law. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant, the Bench said.

Yogesh Goel, top banking lawyer in Chandigarh said that court has also observed that onus to get the rent deed registered is on the landlord. Neither the landlord nor the secured creditor or bank can be allowed to take the plea of non-registration of the tenancy against the tenant.

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