Tenancy : Right to take possession of secured asset would not include right to extinguish pre-existing tenancy : Securiti-sation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Tenancy is a creation of a contractual relationship between
the parties. Such tenancy would thereafter be statutory tenancy governed by the
provisions contained in the Bombay Rents, Hotel and Lodging House Rates Control
Act, 1947.

Where tenancy in respect of part of secured asset was created
long before the borrower (landlord) mortgaged the property to secure debt from
the secured creditor, then the provisions of the Securitisation Act would not
authorise secured creditor to extinguish such tenancy.

In view of relation between the borrower and the bank
(secured creditor), it may be open for the bank to take all such measures as may
be authorised under the Securitisation Act, including the measures enumerated in
Ss.(4) of S. 13. Such measures, however, would not permit the secured creditor
to extinguish the pre-existing tenancy between the tenant and the borrower. The
case would have been different if the tenancy was created subsequent to creation
of charge over the secured asset. The case perhaps also would have been
different had the case of tenancy been set up after creation of mortgage by the
borrower in favour of the secured creditor.

When there is a pre-existing admitted tenancy, in exercise of
powers U/ss.(4) of S. 13 of Act, even if it is open for the secured creditor to
take physical possession (as understood in contradiction to symbolic possession)
of property in question, such physical possession would not necessarily mean
vacant possession thereof. Thus, while asserting its rights u/s.13(4), it would
not be open to the secured creditor to summarily evict the pre-existing tenant
and extinguish his tenancy contrary to contract between landlord and tenant or
the Rent Act.

Neither the right to take possession, nor the right to sell
the property would include the right to extinguish the pre-existing tenancy.

The concept of possession and occupation are not necessarily
one and same. In legal terminology, both have distinct and different meanings.
The Legislature also recognises taking possession of the secured asset even
where it is not necessarily free from all encumbrances. The property can be put
to sale only after possession is taken by authorised officer. However, at the
time of putting property to sale, either by tender or by public auction, proviso
to sub-rule (6) of Rule 8 envisages issuance of public notice which will include
besides other details, the details of encumbrances on immovable property being
sold.

Therefore, despite overriding effect given to the provisions
contained in the Securitisation Act u/s. 35 over any other law for the time
being in force, the Act does not empower the secured creditor to extinguish a
pre-existing tenancy.

[ Dena Bank v. Shri Sihor Nagarik Sahakari Bank Ltd. & Ors., AIR 2008
Gujarat 110]