A 'Tenant ­In ­Sufferance' Not Entitled To Any Protection Of Rent Act Against SARFAESI Proceedings: Supreme Court

The Supreme Court observed that a tenant ­in ­sufferance is not entitled to any protection of the Rent Act against SARFAESI proceedings.

A tenant whose term has expired but has not vacated is called a "tenant at sufferance.‟.

In the absence 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, the bench of Justices S. Abdul Nazeer and Krishna Murari observed.

In this case, the appellant contended that he is a protected tenant under the provisions of the Maharashtra Rent Control Act 1999, and was residing in the premises of the borrower on the basis of an oral tenancy from 12.06.2012. The proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, were initiated against the borrowers. The intervention application of the appellant was dismissed by the Magistrate holding that there was no registered tenancy placed on record by him

In appeal, the court noted that in Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd. , it was held that if the tenancy claim is for any term exceeding one year, the tenancy can be made only by a registered instrument. Referring to Bajarang Shyamsunder Agarwal v. Central Bank of India, the bench observed: 

"12. A Three ­Judge Bench of this Court in Bajarang Shyamsunder Agarwal v. Central Bank of India & Anr, after considering almost all decisions of this Court, in relation to the right of a tenant in possession of the secured asset, has held that if a valid tenancy under law is in existence even prior to the creation of the mortgage, such tenant's possession cannot be disturbed by the secured creditor by taking possession of the property. If a tenancy under law comes into existence after the creation of a mortgage but prior to issuance of a notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65­A of the Transfer of Property Act, 1882. 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. In the said decision of this Court, it was clarified that in the absence 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."

The court noted that it was also held that the Rent Act would not come to the aid of a "tenant­ in ­sufferance" vis­à­vis SARFAESI Act due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act. In this case, the court observed that 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.

"The appellant has pleaded tenancy from 12.06.2012 to 17.12.2018. This is not supported by any registered instrument. Further, even according to the appellant, he is a "tenant­ in­ sufferance", therefore, he is not entitled to any protection of the Rent Act. Secondly, even if the tenancy has been claimed to be renewed in terms of Section 13(13) of the SARFAESI Act, the Borrower would be required to seek consent of the secured creditor for transfer of the Secured Asset by way of sale, lease or otherwise, after issuance of the notice under Section 13(2) of the SARFAESI Act and, admittedly, no such consent has been sought by the Borrower in the present case", the court said while dismissing the appeal.

Case: Hemaraj Ratnakar Salian vs. HDFC Bank Ltd. [CrA 843­-844 OF 2021]
Citation: LL 2021 SC 387
Coram: Justices S. Abdul Nazeer and Krishna Murari

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