BAJARANG SHYAMSUNDER AGARWAL versus CENTRAL BANK OF INDIA & ANR.

Citation: [2019] 12 S.C.R. 352 · Decided: 11-09-2019 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Disposed off

Cited by 2 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 12 S.C.R.
BAJARANG SHYAMSUNDER AGARWAL
v.
CENTRAL BANK OF INDIA & ANR.
(Criminal Appeal No. 1371 of 2019)
SEPTEMBER 11, 2019
[N. V. RAMANA, MOHAN M. SHANTANAGOUDAR AND
INDIRA BANERJEE, JJ.]
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: ss. 13, 14, 17 and 35 –
Tenancy rights over secured interest – Tenant, if protected from
ejectment proceedings under the SARFAESI Act – On facts, secured
asset mortgaged by borrower/landlord with the bank in equitable
mortgage, to secure the credit facility – Failure of borrower/landlord
to make the due repayment of the said credit facilities – Notice u/s.
13(2) to borrower/landlord demanding the payment due –
Application u/s. 14 by the Bank seeking directions to take physical
possession of the secured asset – Allowed by the Magistrate –
Thereafter, application by the tenant seeking stay of the order passed
for taking possession of the property – Rejected by the Magistrate
holding that tenant being a tenant without any registered instrument
is not entitled for the possession of the secured asset for more than
one year from the date of execution of unregistered tenancy
agreement – On appeal, held: Claim of bona fide tenancy of the
tenant cannot be accepted, as there is no good or sufficient evidence
to establish the tenancy – Records do not demonstrate that the tenant
has been able to prove his status as a valid leaseholder to merit the
protection sought for – Furthermore, when the SARFAESI Act
proceedings were pending, the factum of tenancy was never revealed
by the parties – Tenant himself pleaded that he was a tenant who
had entered into an oral agreement, such tenancy impliedly does
not carry any covenant for renewal – Such person occupying the
premises, when the tenancy has been determined, can only be treated
as a ‘tenant in sufferance’ – They do not have any legal rights and
are akin to trespassers – Operation of the Rent Act cannot be
extended to a ‘tenant–in–sufferance’ vis–a–vis the SARFAESI Act,
due to the operation of s.13(2) read with s. 13(13) – Thus, tenant to
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hand over the possession of the secured asset within the stipulated
time which would be delivered to the bank – Maharashtra Rent
Control Act, 1999.
Objective of SARFAESI Act, coupled with the Transfer of
Property Act and the Rent Act – Requirement of reconciliation –
Explained.
s. 13 –  Enforcement of security interest –  Self–executory
mechanism for the banks – Explained.
Dismissing the appeal, the Court
HELD : 1.1 The Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
was enacted in response to a scenario where slow–paced recovery
and staggering amounts of non–performing assets were looming
over the banks. The SARFAESI Act is intended to enable the
bank to resolve the issue of liquidity and aim for the reduction in
the number of non–performing assets. The Preamble to the Act
emphasises upon the efficient and expeditious recovery of bad
debts.  This is also evident from the scheme of the Act. [Para 12]
[361-G-H; 362-A-B]
1.2 Section 13 of the SARFAESI Act provides for the
enforcement of security interest. This is a self–executory
mechanism for the banks. Once the process of realizing the
secured interest takes place, the secured creditor acts as trustee
having de–jure/symbolic possession of the property and is
required by law to realize it strictly in accordance with the
provisions of Section 13, 14 and 15 of the SARFAESI Act.
Crucially, sub–Section (2) of Section 13 of the SARFAESI Act
envisages a notice, which acts as the trigger point for initiation of
the recovery process under the SARFAESI Act. In the said notice,
the secured creditor is required to disclose information on the
amount payable by the borrower and the secured interest intended
to be enforced by the secured creditor in the event of non–
payment of the secured debt. If the borrower fails to discharge
the liability, the secured creditor has four options including taking
possession of the secured assets of the borrower (Section 13(4)
of the SARFAESI Act). Critically for this case, once a notice is
served on the borrower, he cannot further enter into any contract
BAJARANG SHYAMSUNDER AGARWAL v. CENTRAL BANK
OF INDIA & ANR.
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SUPREME COURT REPORTS
[2019] 12 S.C.R.
to create any encumbrance on the property (Section 13(13) of
the SARFAES

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