Tenants – tenants covered by the Rent Control Act cannot be dispossessed in an action initiated by the bank against the landlord debtor under the SARFAESI Act. [SARFAESI Act, 2002, Section 14 ]

The landlords had approached the Bank of India for a financial loan, which was granted against equitable mortgage of several properties belonging to them, including the property in which the Appellant before the Apex Court was a tenant. As the landlords failed to pay the dues within the stipulated time in terms of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the SARFAE SI Act), their account became a non-performing asset. Consequently, the Bank filed an application before the Chief Metropolitan Magistrate, Mumbai, u/s. 14 of the SARFAE SI Act for seeking possession of the mortgaged properties which were in actual possession of the Appellant. The Appellant then filed an application as an intervenor to stay the execution of the order passed by the Chief Metropolitan Magistrate. The learned Chief Metropolitan Magistrate vide order dated 29.11.2014 dismissed the application filed by the Appellant. The matter ultimately reached the Apex court.

The broad point which required consideration was whether a protected tenant under the Maharashtra Rent Control Act, 1999 (Rent Control Act) can be treated as a lessee and whether the provisions of the SARFAE SI Act will override the provisions of the Rent Control Act.

The Apex court also laid down the law where the tenancy is not registered. The Apex court held that the provisions of the SARFAE SI Act cannot be used to override the provisions of the Rent Control Act. Once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act.

The Apex Court further held that according to section 106 of the Transfer of Property Act, 1882 a monthly tenancy shall be deemed to be a tenancy from month to month and must be registered if it is reduced into writing. The Transfer of Property Act, however, remains silent on the position of law in cases where the agreement is not reduced into writing. If the two parties are executing their rights and liabilities in the nature of a landlord – tenant relationship and if regular rent is being paid and accepted, then the mere factum of non-registration of deed will not make the lease itself a nugatory. Further, in terms of section 55(2) of the Rent Control Act, the onus to get such a deed registered is on the landlord. In light of the same, neither the landlord nor the banks can be permitted to exploit the fact of non-registration of the tenancy deed against the tenant.