HARSHAD GOVARDHAN SONDAGAR versus INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD.

HARSHAD GOVARDHAN SONDAGAR versus INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD.

So long as the mortgage deed does not prohibit making a lease and the lease satisfies Section 65A requirements, a lease by the borrower is valid and binding on the secured creditor; lawful possession of lessee is protected unless the lease is determined in accordance with law. SARFAESI Act does not provide that leases are extinguished merely by creditor action, and possession cannot be taken from such lessee under Section 14. Remedy under Section 17 is unavailable to lessees. Tenancy courts do not have jurisdiction over SARFAESI Act actions.

Parties
Applicant: Harshad Govardhan Sondagar; Respondent: International Assets Reconstruction Co. Ltd.; Respondent: Union of India & Ors.
Jurisdiction
India
Judgment Date
03 April 2014
Procedural Posture
Criminal Appeal / Supreme Court Appeal From Bombay High Court Judgment Dated 20.08.2011
Outcome
Appeals allowed
Legal Topics
Securitization, Lease Rights, SARFAESI Act, Transfer of Property, Tenancy, Eviction, Mortgage
Banking Law Property Law Debt Recovery Securitization Lease Rights SARFAESI Act Transfer of Property Tenancy +2 more

Case Brief

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Parties

Harshad Govardhan Sondagar

Applicant

International Assets Reconstruction Co. Ltd.

Respondent

Union of India & Ors.

Respondent

Procedural Posture

Criminal Appeal / Supreme Court Appeal From Bombay High Court Judgment Dated 20.08.2011

Legal Issues

  1. 1 Whether lessees of mortgaged premises are protected under SARFAESI Act when secured creditors seek possession
  2. 2 Whether proceedings under SARFAESI Act extinguish valid leases made prior to or in accordance with s. 65A of Transfer of Property Act
  3. 3 Whether tenants have remedies under Maharashtra Rent Control Act against action under SARFAESI Act

Ratio Decidendi

So long as the mortgage deed does not prohibit making a lease and the lease satisfies Section 65A requirements, a lease by the borrower is valid and binding on the secured creditor; lawful possession of lessee is protected unless the lease is determined in accordance with law. SARFAESI Act does not provide that leases are extinguished merely by creditor action, and possession cannot be taken from such lessee under Section 14. Remedy under Section 17 is unavailable to lessees. Tenancy courts do not have jurisdiction over SARFAESI Act actions.

Court Disposition

Appeals allowed

Orders

  • Orders passed by Chief Metropolitan Magistrate under Section 14 SARFAESI Act for delivery of possession to secured creditors are set aside; matters remitted for fresh orders after hearing.
  • If orders were not yet passed on Section 14 applications, Magistrate or District Magistrate to decide claims by tenants for possession under valid lease before mortgage, applying this judgment.