M/s Goenka Woolen Mills Private Limited v. Bank

This appeal has been preferred against order of the learned Single Judge dismissing the writ petition of the appellant seeking injunction against the Ba nk from proceeding under the Securitization and Reconstruction of Financial Asse ts and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Case of the appellant is that Bank loan was raised by M/s Goenka Woolen Mills Private Limited of which Mr. Vijay Kumar Goenka, Karta of the HUF the appe llant herein, is the Managing Director. Respondent No.5 M/s Calico Woolen Indust ries of which son, wife and son’s wife of Mr. Vijay Kr. Goenka are partners, is the guarantor. For giving guarantee, Respondent No.5 mortgaged its property and the loan was raised in the year 1990. According to the petitioner, in the year 2 004 the petitioner was inducted as tenant on the property by the Respondent No.5 vide unregistered lease deed dated 1.1.2004 for 16 years. The Bank initiated pr oceedings in the year 2006 under the SARFAESI Act, on default in payment of the loan. The petitioner moved this Court on the ground that the said proceedings were in violation of the tenancy rights of the petitioner. Learned Single Judge noticed that the petitioner had earlier challenged the proceedings initiated by the Bank by filing appeal No.1 of 2009 before the D ebts Recovery Tribunal, but the said appeal was dismissed. It was further noted that the tenant was HUF represented by Mr. Vinod Kumar Goenka, father of the own er of the building, which was mortgaged to the Bank and, thus, there was nexus b etween the landlord and the tenant to resist the possession proposed to be taken by the Bank. Section 69 of the Transfer of Property Act, 1882 (it has been poin ted out by learned counsel that the said section has been mentioned by mistake i n place of Section 65A) prohibits lease of mortgaged property beyond three years . Accordingly, the claim of the petitioner was found to be without merit. The op erative part of the order of the learned Single Judge is as follows:- From the pleaded facts and documents made available before me it is clea (cid:28) r that the petitioners, being faced with such situation in the year 2006, appro ached this court by filing WP ( C) No. 6149/06 and in terms of the order passed on 13.12.06, quoted hereinabove, necessary action as proposed as per law appea rs to have taken by the respondent Bank under Section 14 of the SARFAESI Act a nd the petitioner is not entitled to stand on the way to frustrate the implemen tation of the provision of the Act in taking proposed action by the Bank, on the ground that they are tenant under Respondent No.5. The bonafide of the petitio ner is very much doubtful in view of their relationship with the Respondent No.5 , the owner and the defaulter landlord. Considering the facts and circumstances in its entirety, I do not find a ny merit in this writ petition and the same stands dismissed. (cid:29) We have heard learned counsel for the parties. Learned counsel for the appellant submitted that the tenancy in favour o f the appellant was not affected by the SARFAESI Act and, if that be so, the Ban k could not proceed against the said property. It was further submitted that the Bank had sold the property in favour of itself as per the averments made in Mis c. Case No.110 of 2010 in paragraphs 3, 7 and 12 and, on that account, the Bank had lost its right as secured creditor. Reliance has been placed on the judgment of Madras High Court dated 8.3.2011 in W.P.Nos.23850 & amp; 27432 of 2010 (Indi an Bank Vs. M/s Nippon Enterprises South) holding that the tenancy was not affec ted by the SARFAESI Act. Reliance has also been placed on the judgment of the Si ngle Bench of the Calcutta High Court dated August 29,2007 in C.O. No.4565 of 20 06 (Manager, UCO Bank Vs. Samar Sarkar & ors.) Learned counsel for the Bank supports the impugned order and submits tha t the tenancy was created after the mortgage to defeat the rights of the credito r and was not genuine. The implied right of the mortgagor to create limited tena ncy during the period of mortgage was only in absence of contract to the contrar y. The appellant has not produced the mortgage deed to show that the creation of tenancy was not debarred. Moreover, the issue was res judicata in view of dismi ssal of appeal by the Debts Recovery Tribunal. We have considered the rival submissions. The question for consideration is whether post mortgage tenancy created in favou r of family members to defeat rights of a creditor is valid. Apart from the fact that the appellant has failed to establish that ther e is no prohibition for creation of tenancy in terms of the mortgage executed by the principal debtor/guarantor in favour of the Bank and that the issue has bee n decided against the appellant by the Tribunal, there is nothing to rebut the f inding recorded by learned Single Judge that tenancy was not genuine and created in favour of family members to defeat the right of creditor. The tenancy was ad mittedly in favour of the family members created 14 years after the mortgage. We are unable to hold that such category of tenancy will be valid and debar action under the SARFAESI Act. The judgments relied upon do not deal with the issue of post mortgage tenancy in favour of family members and are of no help to the app ellant. In view of above, the appeal is dismissed. Before parting with the order, we make it clear that the debtor or guara ntor is not debarred from bringing his own buyer for purchase of the property su bject to the bid being approved by the Bank and being adequate to liquidate the outstanding loan in which case the Bank may enter into tripartite agreement to r ecover the loan amount.