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If the tenancy claim is for any term exceeding one year, the tenancy can be made only by a registered instrument.: Supreme Court of India

If a tenant claims that he is entitled to possession of a Secured Asset for a term of more than a year, it has to be supported by the execution of a registered instrument. if the tenant only relies upon an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under the provisions of the Transfer of Property Act. This was held by Hon’ble Justice S. Abdul Nazeer and Hon’ble Justice Krishna Murari in the case of Hemraj Ratnakar Salian vs. HDFC Bank Ltd and Ors. [CRIMINAL APPEAL NO(s).843­844 OF 2021] on the 17th of August, 2021 before the Hon’ble Supreme Court of India.

The brief facts of the case are, HDFC Bank had granted financial facility to respondent nos.2 and 3  of Rs.5,50,00,000/­. On 03.04.2013, the Borrowers had mortgaged a property in Mumbai (the Secured Asset) in favour of the Bank with an intention to secure the said credit facility. The accounts of the Borrowers were declared as non-­ performing assets (NPA) on 31.10.2013. On 25.01.2014, the Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to the Borrowers. It is the case of the appellant that he is a tenant of the Secured Asset on a monthly rent of Rs.20,000/­ since 12.06.2012 with an increase of 5% every year. He has been paying rent regularly to his landlord since inception of his tenancy. The appellant filed Exh.8 application before the Magistrate seeking protection of his possession of the Secured Asset as the Magistrate was ceased with the petition under Section 14 of SARFAESI Act filed by the respondent no.1­Bank. Vide Order dated 30.12.2015, the intervention application of the appellant was dismissed by the Magistrate holding that there was no registered tenancy placed on record by the appellant. The present appeal has been filed for restraining HDFC Bank, the first respondent herein, from taking possession of the property in the appellant’s possession.

The counsel for the appellant submitted that, the appellant is a protected tenant under the provisions of the Maharashtra Rent Control Act 1999. He has been paying rent regularly to the landlord. He has also paid advance rent till 17.12.2018. There are continuous rent receipts with him from the date of his induction as a tenant. The tenant was residing in the said premises on the basis of an oral tenancy from 12.06.2012. Therefore, he cannot be evicted from the Secured Asset without due process of law. The counsel for the respondent however submitted that, the rent receipt said to have been issued by the landlord for the period from 12.06.2012 to 12.05.2013 is of 12.05.2013 which is after the date of creation of mortgage in favour of the Bank. There is absolutely no material to show that the tenancy was created earlier to the date of mortgage. The tenancy pleaded by the appellant is an oral tenancy. At the time of grant of facility, third-party valuers had confirmed that the Borrowers were staying at the Secured Asset. The Borrowers, while making representation to the Bank, have not claimed that any tenant is staying at the Secured Asset. The tenancy claimed by the appellant is an after­thought which cannot be believed in the facts and circumstances of the case.

The learned judges heard the submissions of both the parties and relied on the judgement in Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd. & Ors (2014) 6 SCC 1 wherein, “We may now consider the contention of the respondents that some of the appellants have not produced any document to prove that they are bona fide lessees of the secured assets. We find that in the cases before us, the appellants have relied on the written instruments or rent receipts issued by the landlord to the tenant. Section 107 of the Transfer of Property Act provides that a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made “only by a registered instrument” and all other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Hence, if any of the appellants claim that they are entitled to possession of a secured asset for any term exceeding one year from the date of the lease made in his favour, he has to produce proof of execution of a registered instrument in his favour by the lessor. Where he does not produce proof of execution of a registered instrument in his favour and instead relies on an unregistered instrument or oral agreement accompanied by delivery of possession, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, will have to come to the conclusion that he is not entitled to the possession of the secured asset for more than a year from the date of the instrument or from the date of delivery of possession in his favour by the landlord.”

The appeal was dismissed by holding that, “In the present case, first of all there is a serious doubt as to the bona fide of the tenant, as there is no good or sufficient evidence to establish the tenancy of the appellant. According to the appellant, he is a tenant of the Secured Asset from 12.06.2012. However, the documents produced in support of his claim are xerox copies of the rent receipts and the first xerox copy of the rent receipt is of 12.05.2013 which is after the date of creation of the mortgage. It is pertinent to note here that the Borrowers have not claimed that any tenant is staying at the Secured Asset. At the time of grant of facility, third-party valuers had also confirmed that the Borrowers were staying at the Secured Asset. Be that as it may. The appellant has pleaded tenancy from 12.06.2012 to 17.12.2018. This is not supported by any registered instrument.”

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