The Calcutta High Court has that a tenancy created by the borrower after receipt of notice under Section 13(2) of the SARFAESI Act, without prior written consent of the secured creditor, is hit by Section 13(13), is a nullity, and confers no enforceable right, title, or interest against the secured creditor or auction purchaser. Further, where the reliefs in a civil suit are directed against sale certificate, sale deed, and other consequences of measures taken under Section 13(4), such dispute falls within the scope of Section 17 and the jurisdiction of the civil court is barred by Section 34 of the SARFAESI Act.
The Court also affirmed that intermittent user of vacant land does not amount to physical possession, and symbolic or deemed possession delivered under a SARFAESI sale can, in such circumstances, suffice to establish possessory right in favour of the auction purchaser.
The Division Bench comprising Justice Sabyasachi Bhattacharyya and Justice Supratim Bhattacharya observed that the tenancy agreement dated 4 January 2016 was executed long after the notice under Section 13(2) dated 13 May 2011 and therefore squarely offended Section 13(13) of the SARFAESI Act. Since no written consent of the secured creditor had been shown, the Court held that the tenancy was a nullity and conferred no title upon the plaintiff. The Bench also rejected the plaintiff’s objection regarding service or knowledge of the notice, observing that the law did not require service of notice under Sections 13(2) or 13(4) upon anyone other than the borrowers, and that the plaintiff, claiming through the borrowers, had no locus to challenge the propriety of such notice after the process had culminated in a valid sale certificate and sale deed.
On possession, the Bench found it significant that the plaintiff had neither sought a possessory injunction in the plaint nor in the temporary injunction application. It noted that the plaintiff’s own case, including its letter dated 6 November 2023, showed only beneficial use from September 2023 and not continuous possession. The Bench held that such intermittent user by students and guardians during school hours could not amount to physical possession. Since the property was vacant land, the Bench held that symbolic or deemed possession delivered under the sale certificate and sale deed was sufficient to clothe the appellant with possessory rights, especially when no continuous physical possession had been established by the plaintiff.
The Bench also held that the plaintiff’s reliance on the expressions “tenanted,” “as is where is,” and related wording in the sale documents was misplaced. It found that the “tenants” referred to in the sale notice were other persons involved in prior litigation and not the present plaintiff. It further held that the sale deed had to be read as a whole and, when so read along with the sale certificate, it clearly showed that possession had been handed over to the appellant and the sale was free from encumbrances known to the secured creditor.
On maintainability, the Bench compared the prayers in the suit with Sections 13, 17, and 34 of the SARFAESI Act and held that every relief sought by the plaintiff, declaration that the sale certificate and sale deed were illegal, cancellation of those documents, and injunction restraining the appellant from asserting rights under them, was in substance a challenge to measures taken under Section 13(4). Such grievances, the Bench held, lay before the Debts Recovery Tribunal under Section 17, and therefore the civil court’s jurisdiction was expressly barred by Section 34. It added that maintainability of the suit was an essential component of a prima facie case for injunction, and since the suit was prima facie barred, no injunction ought to have been granted.
The Bench further found that the trial judge had committed errors by overlooking the effect of Section 13(13), misconstruing the “as is where is” clauses, holding that Section 34 did not bar the suit, and granting protection regarding possession despite there being no such prayer in the injunction application. It also held that the trial court had ignored an earlier injunction order protecting the appellant’s possession in relation to the same property.
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Briefly, the appeal arose from an order by which the trial court disposed of the plaintiff’s temporary injunction application and directed the defendants to maintain status quo regarding the nature, character, possession, and alienation of the suit property until disposal of the suit. The appellant, defendant no. 3 in the suit, challenged that order. The appellant’s case was that the suit property had already been sold in its favour under the SARFAESI Act after the borrowers’ account turned NPA on 31 March 2011, a notice under Section 13(2) was issued on 13 May 2011, and a possession notice under Section 13(4) was issued on 18 July 2011. The appellant was the successful auction purchaser, received a sale certificate on 30 June 2021, and a formal sale deed was executed on 8 October 2021. The plaintiff, however, claimed rights on the basis of a tenancy agreement dated 4 January 2016 allegedly created by the original owners.
The appellant argued that the alleged tenancy was created after issuance of the Section 13(2) notice and was therefore hit by Section 13(13) of the SARFAESI Act. It also contended that the plaintiff’s own materials showed that it started using the property only from September 2023, and that the plaintiff had not sought any substantive relief protecting possession in the suit. The appellant further relied on an earlier injunction order in its own favour protecting its possession and argued that the present suit was barred by Section 34 of the SARFAESI Act because the reliefs sought were challenges to measures taken under Section 13(4), which fell within the jurisdiction of the Debts Recovery Tribunal.
The plaintiff/respondent no. 1 contended that the appellant never had physical possession and that the sale notice itself referred to the property as “tenanted” and under “symbolic” possession of the bank. It argued that the sale deed expressions such as “as is where is” and “deemed possession” showed that the property was sold subject to its tenancy and possession. It also submitted that the civil suit was maintainable because the reliefs claimed could not be granted by the Debts Recovery Tribunal, that there could be no mini-trial at the injunction stage, and that even a trespasser could not be evicted except by due process of law.
