HARSHAD GOVARDHAN SONDAGAR versus INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD.

Citation: [2014] 11 S.C.R. 605 · Decided: 03-04-2014 · Supreme Court of India · Bench: A.K. PATNAIK · Disposal: Appeal(s) allowed

Cited by 7 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

• 
[2014] 11 S.C.R. 605 
HARSHAD GOVARDHAN SONDAGAR 
v. 
INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD. 
& ORS. 
(Criminal Appeal No. 736 of 2014) 
APRIL 03, 2014 
[A.K. PATNAIK AND V. GOPALA GOWDA, JJ.] 
A 
B 
Securitisation and Reconstruction of Financial Assets and 
Enforcement of Security Interest Act, 2002 - ss. 13, 14 and C 
17 - Proceedings under the Act - By the secured creditor 
against the borrower - The secured assets consisting of 
premises leased out by the borrower and was in possession 
of the lessees - Whether the Act would affect the /ease - Held: 
So long as the mortgage deed does not prohibit a mortgagor D 
from making a /ease of the mortgaged property and so Jong 
as the lease satisfies the requirements of s. 65A(2) of T.P. 
Act, a /ease made by borrower as a mortgagor is valid and 
binding on the secured creditor as a mortgagee - So Jong as 
/ease of an immovable property does not get determined, 
E 
possession of the Jessee is lawful - Initiation of proceeding 
under s. 13 does not have the effect of determining the lease 
- such lawful possession of a lessee cannot be taken under 
the provisions of the Act - Hence the competent courts do not 
have power to take possession uls. 14 from such lessee -
F 
Transfer of Property Act, 1882 - s. 65A. 
Allowing the appeals, the Court 
HELD: 1. Sub-section (1) of Section 65A of the 
Transfer of Property Act states that the mortgagor has the G 
power to make lease of a mortgaged property while he 
is in lawful possession of the same subject to the 
provisions of sub-section (2) of Section 65A of the 
605 
H 
-,.. 
606 
SUPREME COURT REPORTS 
[2014] 11 S.C.R. 
A 
Transfer of Property Act and such lease is binding on the 
mortgagee. Sub-section (3) of Section 65A further 
provides that such a power is available with the 
mortgagor to make a lease of the mortgage property only 
if and as far as a contrary intention is not expressed in 
B 
the mortgage-deed. Thus, so long as the mortgage-deed 
does not prohibit a mortgagor from making a lease of the 
mortgaged property and so long as the lease satisfies the 
requirements of sub-section (2) of Section 65A, a lease 
made by a borrower as a mortgagor will not only be valid 
c but is also binding on the secured creditor as a 
mortgagee. [Para 12] [621-E-G] 
2. Sub-section (13) of Secti~n 13 of the SARFAESI 
Act, however, provides that after receipt of notice referred 
0 
to in sub-section (2) of Section 13 of the SARFAESI Act, 
no borrower shall lease any of his secured assets 
referred to in the notice, without the prior written consent 
of the secured creditor. This provision in sub-section (13) 
of Section 13 of the SARFAESI Act and the provisions of 
the Transfer of Property Act enabling the borrower or the 
E . mortgagor to make a lease are ·in.consistent with each 
other. Hence, sub-section (13) of Section 13 of the 
SARFAESI Act will override the provisions of Section 65A 
of the Transfer of Property Act by virtue of Section 35 of 
F 
the SARFAESI Act, and a lease of a secured asset made 
by the borrowe·r after he receives the notice under sub-
section ·(2) of Section 13 froin the secured creditor 
intending to enforce that secured asset will not be a valid 
lease. [Para 15] [629-B-D] 
'· 
G 
3. There is no provision in Section 13 of the· 
SARFAESI Act that a I.ease in respect of a secured asset 
shall stand determined when the secured creditor 
decides to take the measures mentioned in Section 13 of 
the said Act. Without the determination of a valid lease, 
H 
the possession of the lessee is lawful and such lawful 
• 
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 607 
ASSETS RECONSTRUCTION CO. LTD. 
possession of a lessee has to be protected by all courts A 
and tribunals. So long as a lease of an immovable 
property does not get determined, the lessee tias a right 
to enjoy the property and this right is a right to property 
which cannot be taken away without the authority of law 
as provided in Article 300A of the Constitution. [Para 16) B 
[631-B-E] 
4. Only if possession of the secured asset is required 
to be taken under the provisions of the SARFAESI Act, 
the secured creditor can move the Chief Metropolitan 
Magistrate or the District Magistrate for assistance to take C 
possession of the secured asset. Since Section 13 of the 
SARFAESI Act does not provide that the lease in respect 
of a secured asset will get determined when the secured 
creditor decides to take the measures in the said section, 
p

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