MANU/SC/0061/2016

Equivalent Citation: 2016(1)AC R918, AIR2016SC 530, 2016(2)AJR243, 2016(1) AKR 771, 2016(2)ALLMR920, 2016ALLMR(C ri)1322, 2016 (115)
ALR 442, I(2016)BC 471(SC ), 2016(2)BomC R67, 2016(1)BomC R(C ri)705, I(2016)C C R351(SC ), 2016(2) C HN (SC ) 257, [2016]131C LA277(SC ),
123(2017)C LT931, (2016)2C ompLJ369(SC ), 2016(2)C TC 319, 226(2016)DLT474(SC ), 2016(2)J.L.J.R.121, 2016 (1) KHC 330, 2016(1)KLJ551,
2016(1)KLT623, 2016-4-LW7, 2016(5)MhLj555, (2016)1MLJ583(SC ), 2016(2)N.C .C .1, 2016(2)PLJR230, (2016)181PLR784, 2016(1)RC R(C ivil)911,
2016(1)RC R(Rent)81, 2016 131 RD564, 2016(1)SC ALE472, (2016)3SC C 762, [2016]134SC L268(SC ), 2016(1)UC 292

IN THE SUPREME COURT OF INDIA

Criminal Appeal No. 52 of 2016 (Arising out of SLP (Crl.) No. 8060 of 2015),
Criminal Appeal No. 53 of 2016 (Arising out of SLP (Crl) No. 8064 of 2015), Criminal
Appeal No. 54 of 2016 (Arising out of SLP (Crl) No. 8063 of 2015), Criminal Appeal
No. 55 of 2016 (Arising out of SLP (Crl) No. 8062 of 2015), Criminal Appeal No. 56
of 2016 (Arising out of SLP (Crl) No. 8066 of 2015), Criminal Appeal No. 57 of 2016
(Arising out of SLP (Crl) No. 8067 of 2015), Criminal Appeal No. 58 of 2016 (Arising
out of SLP (Crl) No. 8068 of 2015), Criminal Appeal No. 59 of 2016 (Arising out of
SLP (Crl) No. 8069 of 2015), Civil Appeal Nos. 414-415 of 2016 (Arising out of SLP
(C) Nos. 13295-13296 of 2015), CR. M. P. No. 6822/15 in Criminal Appeal No. 753 of
2014, CR. M. P. No. 6823/15 in Criminal Appeal No. 754 of 2014, Criminal Appeal
No. 62 of 2016 (Arising out of SLP (Crl) No. 6944 of 2015), Criminal Appeal No. 63
of 2016 (Arising out of SLP (Crl) No. 6945 of 2015), Civil Appeal No. 469 of 2016
(Arising out of SLP (C) No. 25133 of 2015), Criminal Appeal No. 64 of 2016 (Arising
out of SLP (Crl) No. 6941 of 2015), Civil Appeal No. 417 of 2016 (Arising out of SLP
(C) No. 28040 of 2015), Civil Appeal No. 419 of 2016 (Arising out of SLP (C) No.
28446 of 2015), Civil Appeal No. 420 of 2016 (Arising out of SLP (C) No. 28300 of
2015), Civil Appeal No. 421 of 2016 (Arising out of SLP (C) No. 12772 of 2015) and
Civil Appeal No. 422 of 2016 (Arising out of SLP (C) No. 31080 of 2015)
Decided On: 20.01.2016
Appellants: Vishal N. Kalsaria
Vs.
Respondent: Bank of India and Ors.
Hon'ble Judges/Coram:
V. Gopala Gowda and Amitava Roy, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: Basava Prabhu S. Patil, Sr. Adv., Nikhil Goel, Naveen
Goel, Purvish Jitendra Malkan, Dharita P. Malkan, Garvesh Kabra, H.C. Kharbanda,
Anurag Kishore, Adarsh Upadhyay and Pramod B. Agarwala, Advs.
For Respondents/Defendant: Dhruv Mehta, Amarendra Sharan, Vikas Singh, Shyam
Diwan, Sr. Advs., Sameer Abhyankar, Sonal Jain, Heena Sharma, Amar Dave,
Krishnayan Sen, Ankit Jain, Kunal Chatterji, Anil Kumar Sangal, Siddharth Sangal,
M.T. George, M.G. Yogamaya, Sanjay Kapur, Anmol Chandan, Priyanka Das, O.P.
Gaggar, Aditya Gaggar, Rajeev K. Pandey, Rajeev Maheshwaranand Roy, Kunal A.
Cheema and Nishant Katneshwarkar, Advs.
Case Note:
Tenancy - Treatment of protected tenant as lessee - Respondent Nos. 4 and
5 - Approached Respondent No. 1-Bank of India - Financial loan - Granted
against equitable mortgage of several properties belonging to them -
Including property where Appellant is a tenant - Respondent Nos. 4 and 5
failed to pay dues - In terms of SARFAESI Act, their account became a non-

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performing asset - Respondent-Bank served notice - On failure of
Respondent Nos. 4 and 5 - Respondent-Bank filed application before Chief
Judicial Magistrate - Sought possession of mortgaged properties -
Properties in actual possession of Appellant - Learned Chief Metropolitan
Magistrate allowed application - Directed Assistant Registrar of Courts to
take possession of secured assets - Respondent No. 4 served notice on
Appellant - Vacate the premises within 12 days - Appellant filed Rent Suit -
Court of Small Causes allowed application - Passed ad interim order of
injunction - Favour of Appellant - Restrained Respondent No. 4 from
obstructing possession of Appellant - Appellant then filed application as
intervenor - Stay the execution of order passed by Chief Judicial Magistrate
- Learned Chief Judicial Magistrate dismissed application filed by Appellant
- Present Appeal - Whether a 'protected tenant' under The Maharashtra
Rent Control Act, 1999 can be treated as a lessee
Constitution - Overriding of provisions - Learned Chief Judicial Magistrate
dismissed Appellant's application for stay of execution - Held - When
secured creditor takes action - Section 13 or 14 of SARFAESI Act -
Recovering the possession of secured interest and recovering the loan
amount - Not open for Court to grant injunction Under Section 33 - Rent
Control Act - Present Appeal - Whether the provisions of SARFAESI Act will
override the provisions of the Rent Control Act
Facts:
Respondent Nos. 4 and 5 had approached the Bank of India (Respondent
No. 1) (the Respondent Bank) for a financial loan, which was granted
against equitable mortgage of several properties belonging to them,
including the property in which the Appellant is allegedly a tenant. The
Respondent Nos. 4 and 5 failed to pay the dues within the stipulated time
and thus, in terms of The Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act),
their account became a non-performing asset.
On 12.03.2010, the Respondent-Bank served on them notice Under Section
13(2) of SARFAESI Act. On failure of the Respondents to clear the dues
from the loan amount borrowed by the above Respondent Nos. 4 and 5
within the stipulated statutory period of 60 days, the Respondent-Bank
filed an application before the Chief Metropolitan Magistrate, Mumbai Under
Section 14 of the SARFAESI Act for seeking possession of the mortgaged
properties which are in actual possession of the Appellant. The learned
Chief Metropolitan Magistrate allowed the application filed by the
Respondent-Bank and directed the Assistant Registrar, Borivali Centre of
Courts to take possession of the secured assets. On 26.05.2011, the
Respondent No. 4 served a notice on the Appellant, asking him to vacate
the premises in which he was residing within 12 days from the receipt of
the notice.
The Appellant fearing eviction, filed a Rent Suit before the Court of Small
Causes, Bombay. Vide order dated 08.06.2011, the Small Causes Court
allowed the application and passed an ad interim order of injunction in
favour of the Appellant, restraining Respondent No. 4 from obstructing the
possession of the Appellant over the suit premises during the pendency of
the suit. In view of the order dated 08.06.2011, the Appellant then filed an

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application as an intervenor to stay the execution of the order dated
08.04.2011 passed by the Chief Metropolitan Magistrate. The learned Chief
Metropolitan Magistrate vide order dated 29.11.2014 dismissed the
application filed by the Appellant by placing reliance on a judgment of this
Court rendered in the case of Harshad Govardhan Sondagar v. International
Assets Reconstruction Co. Ltd. and Ors.
The learned Chief Metropolitan Magistrate further held that when the
secured creditor takes action Under Section 13 or 14 of the SARFAESI Act to
recover the possession of the secured interest and recover the loan amount
by selling the same in public auction, then it is not open for the Court to
grant an injunction Under Section 33 of the Rent Control Act. The learned
Chief Metropolitan Magistrate further held that the order dated 08.06.2011
passed by the Small Causes Court, Mumbai cannot be said to be binding
upon the Respondent-Bank, especially in the light of the fact that it was
not a party to the proceedings. Hence the present appeal filed by the
Appellant.
Held, while allowing the appeals
1. The SARFAESI Act, which came into force from 21.06.2002, was enacted
to provide procedures to the Banks to recover their security interest from
the debtors and their collateral security assets as provided under the
provisions of the Act. It becomes clear that the SARFAESI Act is meant to
operate as a tool for banks and ensures a smooth debt recovery process.
Providing a smooth and efficient recovery procedure to enable the banks to
recover the Non Performing Assets is a laudable object indeed, which needs
to be ensured for the development of the economy of the Country. What has
complicated the matters, however, is the clash of this laudable object with
another laudable object, namely, to secure the rights of the tenants under
the various Rent Control Acts. Rent Control Acts have been enacted by the
different state legislatures to secure the rights of the weaker sections of
the society, viz., the tenants.[22]
2. It becomes clear from a perusal of the Rent Control Act that the ultimate
object behind the enactment of this legislation is to control and regulate
the rate of rent so that unnecessary hardship is not caused to the tenant,
and also to provide protection to the tenants against arbitrary and
unreasonable evictions from the possession of the property.[23]
3. When one understands the factual matrix in the backdrop of the
objectives of the above two legislations, the controversy in the instant case
assumes immense significance. There is an interest of the bank in
recovering the Non Performing Asset on the one hand, and protecting the
right of the blameless tenant on the other. The Rent Control Act being a
social welfare legislation, must be construed as such. A landlord cannot be
permitted to do indirectly what he has been barred from doing under the
Rent Control Act, more so when the two legislations, that is the SARFAESI
Act and the Rent Control Act operate in completely different fields. While
SARFAESI Act is concerned with Non Performing Assets of the Banks, the
Rent Control Act governs the relationship between a tenant and the
landlord and specifies the rights and liabilities of each as well as the rules
of ejectment with respect to such tenants. The provisions of the SARFAESI
Act cannot be used to override the provisions of the Rent Control Act.[24]

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4. If the contentions of the learned Counsel for the Respondent Banks are
to be accepted, it would render the entire scheme of all Rent Control Acts
operating in the country as useless and nugatory. Tenants would be left
wholly to the mercy of their landlords and in the fear that the landlord may
use the tenanted premises as a security interest while taking a loan from a
bank and subsequently default on it. Conversely, a landlord would simply
have to give up the tenanted premises as a security interest to the creditor
banks while he is still getting rent for the same. In case of default of the
loan, the maximum brunt will be borne by the unsuspecting tenant, who
would be evicted from the possession of the tenanted property by the Bank
under the provisions of the SARFAESI Act. Under no circumstances can this
be permitted, more so in view of the statutory protections to the tenants
under the Rent Control Act and also in respect of contractual tenants along
with the possession of their properties which shall be obtained with due
process of law.[24]
5. The issue of determination of tenancy is also one which is well settled.
While Section 106 of the Transfer of Property Act, 1882 does provide for
registration of leases which are created on a year to year basis, what needs
to be remembered is the effect of non-registration, or the creation of
tenancy by way of an oral agreement. 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.
[25]
6. 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 nugatory. If no written lease deed exists, then such tenants
are required to prove that they have been in occupation of the premises as
tenants by producing such evidence in the proceedings Under Section 14 of
the SARFAESI Act before the learned Magistrate. Further, in terms of
Section 55(2) of the special law in the instant case, which is 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.
[25]
7. It is a well settled position of law that a word or sentence cannot be
picked up from a judgment to construe that it is the ratio decidendi on the
relevant aspect of the case. It is also a well settled position of law that a
judgment cannot be read as a statute and interpreted and applied to fact
situations. The decision of this Court rendered in the case of Harshad
Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. and
Ors. cannot be understood to have held that the provisions of the SARFAESI
Act override the provisions of the Rent Control Act, and that the Banks are
at liberty to evict the tenants residing in the tenanted premises which have
been offered as collateral securities for loans on which default has been
done by the debtor/landlord.[27] and[28]
8. As far as granting leasehold rights being created after the property has

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been mortgaged to the bank, the consent of the creditor needs to be taken.
The Court has already taken this view in the case of Harshad Govardhan
Sondagar v. International Assets Reconstruction Co. Ltd. and Ors. The Court
has not stated anything to the effect that the tenancy created after
mortgaging the property must necessarily be registered under the
provisions of the Registration Act and the Stamp Act.[29]
9. It is a settled position of law that 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. A tenant cannot be arbitrarily
evicted by using the provisions of the SARFAESI Act as that would amount
to stultifying the statutory rights of protection given to the tenant. A non
obstante Clause (Section 35 of the SARFAESI Act) cannot be used to
bulldoze the statutory rights vested on the tenants under the Rent Control
Act. The expression 'any other law for the time being in force' as appearing
in Section 35 of the SARFAESI Act cannot mean to extend to each and
every law enacted by the Central and State legislatures. It can only extend
to the laws operating in the same field.[30]
10. If the interpretation of the provisions of SARFAESI Act as submitted by
the learned senior Counsel appearing on behalf of the Banks is accepted, it
would not only tantamount to violation of rule of law, but would also
render a valid Rent Control statute enacted by the State Legislature in
exercise of its legislative power Under Article 246(2) of the Constitution of
India useless and nugatory. The Constitution of India envisages a federal
feature, which has been held to be a basic feature of the Constitution.[31]
11. In view of the above legal position, if the Court accepts the legal
submissions made on behalf of the Banks to hold that the provisions of
SARFAESI Act override the provisions of the various Rent Control Acts to
allow a Bank to evict a tenant from the tenanted premise, which has
become a secured asset of the Bank after the default on loan by the
landlord and dispense with the procedure laid down under the provisions of
the various Rent Control Acts and the law laid down by this Court in catena
of cases, then the legislative powers of the state legislatures are denuded
which would amount to subverting the law enacted by the State
Legislature. Surely, such a situation was not contemplated by the
Parliament while enacting the SARFAESI Act and therefore the
interpretation sought to be made by the learned Counsel appearing on
behalf of the Banks cannot be accepted by this Court as the same is wholly
untenable in law.The Court is unable to agree with the contentions
advanced by the learned Counsel appearing on behalf of the Respondent
Banks.[32] and[33]
12. In view of the foregoing, the impugned judgments and orders passed by
the High Court/Chief Metropolitan Magistrate are set aside and the appeals
are allowed. The Court further directed that the amounts which are in
deposit pursuant to the conditional interim order of this Court towards rent
either before the Chief Metropolitan Magistrate/Magistrate Court or with
the concerned Banks, shall be adjusted by the concerned Banks towards the
debt due from the debtors/landlords in respect of the Appellants in these
appeals. The enhanced rent by way of conditional interim order shall be
continued to be paid to the respective Banks, which amount shall also be
adjusted towards debts of the debtors/landlords. All the pending

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applications are disposed of.[34]

JUDGMENT
V. Gopala Gowda, J.
1. The applications for impleadment are allowed.
2. Leave granted in all the special leave petitions.
3. In the present batch of appeals, the broad point which requires our attention and
consideration is whether a 'protected tenant' under The Maharashtra Rent Control Act,
1999 (in short the 'Rent Control Act') can be treated as a lessee, and whether the
provisions of The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (in short, the 'SARFAESI Act') will
override the provisions of the Rent Control Act. How can the right of the 'protected
tenant' be preserved in cases where the debtor-landlord secures a loan by offering
the very same property as a security interest either to Banks or Financial Institutions,
is also the essential legal question to be decided by us.
4. In all the appeals, the same question of law would arise for consideration. For the
sake of convenience and brevity, we would refer to the relevant facts from the appeal
arising out of S.L.P. (Crl.) No. 8060 of 2015, which has been filed against the
impugned judgment and order dated 29.11.2014 in M.A. No. 123 of 2011 in Case No.
237 of 2010 passed by the learned Chief Metropolitan Magistrate, Esplanade,
Mumbai, wherein the application of the Appellant herein for impleadment as
intervenor as well as stay of the order dated 08.04.2011 passed in Case No. 237 of
2010 by the learned Magistrate, Esplanade, Mumbai, was dismissed.
5 . Respondent Nos. 4 and 5 had approached the Bank of India (Respondent No. 1)
(in short "the Respondent Bank") for a financial loan, which was granted against
equitable mortgage of several properties belonging to them, including the property in
which the Appellant is allegedly a tenant. The Respondent Nos. 4 and 5 failed to pay
the dues within the stipulated time and thus, in terms of the SARFAESI Act, their
account became a non-performing asset. On 12.03.2010, the Respondent-Bank
served on them notice Under Section 13(2) of SARFAESI Act. On failure of the
Respondents to clear the dues from the loan amount borrowed by the above
Respondent Nos. 4 and 5 within the stipulated statutory period of 60 days, the
Respondent-Bank filed an application before the Chief Metropolitan Magistrate,
Mumbai Under Section 14 of the SARFAESI Act for seeking possession of the
mortgaged properties which are in actual possession of the Appellant. The learned
Chief Metropolitan Magistrate allowed the application filed by the Respondent-Bank
vide order dated 08.04.2011 and directed the Assistant Registrar, Borivali Centre of
Courts to take possession of the secured assets. On 26.05.2011, the Respondent No.
4 served a notice on the Appellant, asking him to vacate the premises in which he
was residing within 12 days from the receipt of the notice. The Appellant fearing
eviction, filed a Rent Suit R.A.D. Suit No. 913 of 2011 before the Court of Small
Causes, Bombay. Vide order dated 08.06.2011, the Small Causes Court allowed the
application and passed an ad interim order of injunction in favour of the Appellant,
restraining Respondent No. 4 from obstructing the possession of the Appellant over
the suit premises during the pendency of the suit. In view of the order dated
08.06.2011, the Appellant then filed an application as an intervenor to stay the
execution of the order dated 08.04.2011 passed by the Chief Metropolitan Magistrate.
The learned Chief Metropolitan Magistrate vide order dated 29.11.2014 dismissed the
application filed by the Appellant by placing reliance on a judgment of this Court

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rendered in the case of Harshad Govardhan Sondagar v. International Assets
Reconstruction Co. Ltd. and Ors. MANU/SC/0377/2014 : (2014) 6 SCC 1.
Dismissing the application, the learned judge held as under:
3....the Hon'ble Supreme Court has held that the alleged tenant has to
produce proof of execution of a registered instrument in his favour by the
lessor. Where he does not produce proof of execution of a registered
instrument in his favour and instead relies on an unregistered instrument or
oral agreement accompanied by delivery of possession, the Chief
Metropolitan Magistrate or the District Magistrate, as the case may be, will
have to come to the conclusion that he is not entitled to the possession of
the secured asset for more than a year from the date of the instrument or
from the date of delivery of possession in his favour by the landlord.
4 . It is to be highlighted that the intervener did not place on record any registered
instrument to fulcrum his contention. So, in view of the ratio laid down in Harshad
Sondagar's case (cited supra), I hold that the intervener is not entitled to any
protection under the law.
6 . The learned Chief Metropolitan Magistrate further held that when the secured
creditor takes action Under Section 13 or 14 of the SARFAESI Act to recover the
possession of the secured interest and recover the loan amount by selling the same
in public auction, then it is not open for the Court to grant an injunction Under
Section 33 of the Rent Control Act. The learned Chief Metropolitan Magistrate further
held that the order dated 08.06.2011 passed by the Small Causes Court, Mumbai
cannot be said to be binding upon the Respondent-Bank, especially in the light of the
fact that it was not a party to the proceedings. Hence the present appeal filed by the
Appellant.
7. We have heard the learned Counsel for both the parties.
8 . Before we consider the submissions advanced by the learned Counsel appearing
on behalf of the parties, it is essential to first appreciate the provisions of law in
question.
9 . The Maharashtra Rent Control Act, 1999, which repealed the Bombay Rent Act,
1947 was enacted by the state legislature of Maharashtra under Entry 18 of List II of
the Seventh Schedule of the Constitution of India to consolidate and unify the
different provisions and legislations in the State which existed pertaining to rent and
the landlord-tenant relationship. The Statement of objects and reasons of the Rent
Control Act reads, inter alia, as under:
..At present, there are three different rent control laws, which are in
operation in this State.... All these three laws have different provisions and
the courts or authorities which have the jurisdiction to decide matters arising
out of these laws are also not uniform. The Procedures under all the three
laws are also different in many of the material aspect.
2. Many features of the rent control laws have outlived their utility. The task,
therefore, of unifying, consolidating and amending the rent control laws in
the State and to bring the rent control legislation in tune with the changed
circumstances now, had been engaging the attention of the Government......
3. In the meantime, the Central Government announced the national housing
policy which recommends, inter alia, to carry out suitable amendments to the
existing rent control laws for creating and enabling involvement in housing

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 activity and for guaranteeing access to shelter for the poor. The National
Housing Policy further recognized the important role of rental housing in
urban areas in different income groups and low-income households in
particular who cannot afford ownership house. The existing rent control
legislation has resulted in a freeze of rent, very low returns in investment
and difficulty in resuming possession and has adversely affected investment
in rental housing and cause deterioration of the rental housing stock.
On the other hand, the SARFAESI Act was enacted by the Parliament with a view to
regulate the securitisation and reconstruction of financial assets and enforcement of
security interests against the debtor by securing the possession of such secured
assets and recover the loan amount due to the Banks and Financial Institutions. The
statement of objects and reasons of the SARFAESI Act reads as under:
The financial sector has been one of the key drivers in India's efforts to
achieve success in rapidly developing its economy. While banking industry in
India is progressively complying with the international prudential norms and
accounting practices, there are certain areas in which the banking and
financial sector do not have a level playing field as compared to other
participants in the financial markets in the world. There is no legal provision
for facilitating Securitisation of financial assets of banks and financial
institutions. Further, unlike international banks, the banks and financial
institutions in India do not have power to take possession of securities and
sell them. Our existing legal framework relating to commercial transactions
has not kept pace with the changing commercial practices and financial
sector reforms. This has resulted in slow pace of recovery of defaulting loans
and mounting levels of non-performing assets of banks and financial
institutions. Narasimham Committee I and II and Andhyarujina Committee
constituted by the Central Government for the purpose of examining banking
sector reforms have considered the need for changes in the legal system in
respect of these areas.
(Emphasis laid by this Court)
10. The SARFAESI Act enacted under List I of the Constitution of India thus, seeks to
regulate asset recovery by the Banks. It becomes clear from a perusal of the
Statements of Objects and Reasons of the Rent Control Act and the SARFAESI Act that
the two Acts are meant to operate in completely different spheres. So far as
residential tenancy rights are concerned, they are governed by the provisions of the
Rent Control Act which occupies the field on the subject.
11. The controversy in the instant case arises squarely out of the interpretation of a
decision of this Court in the case of Harshad Govardhan Sondagar (supra). The
fact situation facing the court in that case was similar to the one in the instant case.
The premises which the Appellants therein claimed to be the tenants of had been
mortgaged to different banks as collateral security to such borrowed amount by the
landlord/debtor. On default of payment of the borrowed amount by the
landlords/debtors, the banks made application Under Section 14(1) of the SARFAESI
Act to the Chief Metropolitan Magistrate, praying that the possession of the premises
be handed over to them in accordance with the provisions of the SARFAESI Act. This
Court in the case of Harshad Govardhan Sondagar (supra) held as under:
34. ...In our view, therefore, the High Court has not properly appreciated the
judgment of this Court in Transcore (supra) and has lost sight of
the opening words of Sub-section (1) of Section 13 of the SARFAESI Act

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 which state that notwithstanding anything contained in Section 69 or Section
69A of the Transfer of Property Act, 1882, any security interest created in
favour of any secured creditor may be enforced, without the intervention of
the court or tribunal, by such creditor in accordance with the provisions of
the Act. The High Court has failed to appreciate that the provisions of Section
13 of the SARFAESI Act thus override the provisions of Section 69 or Section
69A of the Transfer of Property Act, but does not override the provisions of
the Transfer of Property Act relating to the rights of a lessee under a lease
created before receipt of a notice Under Sub-section (2) of Section 13 of the
SARFAESI Act by a borrower. Hence, the view taken by the Bombay High
Court in the impugned judgment as well as in M/s. Trade Well (supra) so far
as the rights of the lessee in possession of the secured asset under a valid
lease made by the mortgagor prior to the creation of mortgage or after the
creation of mortgage in accordance with Section 65A of the Transfer of
Property Act is not correct and the impugned judgment of the High Court
insofar it takes this view is set aside.
(Emphasis laid by this Court)
1 2 . Mr. Pallav Shishodia, the learned senior Counsel appearing on behalf of the
Appellant in the appeal @ out of S.L.P. (C) No. 8060 of 2015 places reliance on the
decision of this Court in Harshad Govardhan Sondagar (supra), to contend that
prior tenancy in respect of the mortgaged property to the Bank is protected in terms
of the Rent Control Act. The relevant paragraphs of the decision are quoted as under:
25. The opening words of Sub-section (1) of Section 14 of the SARFAESI Act
also provides that if any of the secured asset is required to be sold or
transferred by the secured creditor under the provisions of the Act, the
secured creditor may take the assistance of the Chief Metropolitan Magistrate
or the District Magistrate. Where, therefore, such a request is made by the
secured creditor and the Chief Metropolitan Magistrate or the District
Magistrate finds that the secured asset is in possession of a lessee but the
lease under which the lessee claims to be in possession of the secured asset
stands determined in accordance with 4 Section 111 of the Transfer of
Property Act, the Chief Metropolitan Magistrate or the District Magistrate may
pass an order for delivery of possession of secured asset in favour of the
secured creditor to enable the secured creditor to sell and transfer the same
under the provisions of the SARFAESI Act. Sub-section (6) of Section 13 of
the SARFAESI Act provides that any transfer of secured asset after taking
possession of secured asset by the secured creditor shall vest in the
transferee all rights in, or in relation to, the secured asset transferred as if
the transfer had been made by the owner of such secured asset. In other
words, the transferee of a secured asset will not acquire any right in a
secured asset Under Sub-section (6) of Section 13 of the SARFAESI Act,
unless it has been effected after the secured creditor has taken over
possession of the secured asset. Thus, for the purpose of transferring the
secured asset and for realizing the secured debt, the secured creditor will
require the assistance of the Chief Metropolitan Magistrate or the District
Magistrate for taking possession of a secured asset from the lessee where the
4 lease stands determined by any of the modes mentioned in Section 111 of
the Transfer of Property Act.
32. When we read Sub-section (1) of Section 17 of the SARFAESI Act, we
find that under the said Sub-section "any person (including borrower)",
aggrieved by any of the measures referred to in Sub-section (4) of Section

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 13 taken by the secured creditor or his authorised officer under the Chapter,
may apply to the Debts Recovery Tribunal having jurisdiction in the matter
within 45 days from the date on which such measures had been taken. We
agree with the Mr. Vikas Singh that the words 'any person' are wide enough
to include a lessee also. It is also possible to take a view that within 45 days
from the date on which a possession notice is delivered or affixed or
published Under Sub-rules (1) and (2) of Rule 8 of the Security Interest
(Enforcement) Rules, 2002, a lessee may file an application before the Debts
Recovery Tribunal having jurisdiction in the matter for restoration of
possession in case he is dispossessed of the secured asset. But when we
read Sub-section (3) of Section 17 of the SARFAESI Act, we find that the
Debts Recovery Tribunal has powers to restore 5 possession of the secured
asset to the borrower only and not to any person such as a lessee. Hence,
even if the Debt Recovery Tribunal comes to the conclusion that any of the
measures referred to in Sub-section (4) of Section 13 taken by the secured
creditor are not in accordance with the provisions of the Act, it cannot
restore possession of the secured asset to the lessee. Where, therefore, the
Debts Recovery Tribunal considers the application of the lessee and comes to
the conclusion that the lease in favour of the lessee was made prior to the
creation of mortgage or the lease though made after the creation of mortgage
is in accordance with the requirements of Section 65A of the Transfer of
Property Act and the lease was valid and binding on the mortgagee and the
lease is yet to be determined, the Debts Recovery Tribunal will not have the
power to restore possession of the secured asset to the lessee. In our
considered opinion, therefore, there is no remedy available Under Section 17
of the SARFAESI Act to the lessee to protect his lawful possession under a
valid lease.
13. The learned senior Counsel contends that it is a settled position of law that in the
absence of a valid document of lease for more than one year or in case of an invalid
lease deed, the relation of tenancy between a landlord and the tenant is still created
due to delivery of possession to the tenant and payment of rent to the landlord-
owner and such tenancy is deemed to be a tenancy from month to month in respect
of such property. The learned senior Counsel further places reliance on a three Judge
Bench decision of this Court in Anthony v. K.C. Ittoop & Sons and Ors.
MANU/SC/0443/2000 : (2000) 6 SCC 394, wherein it was held as under:
...so far as the instrument of lease is concerned there is no scope for holding
that Appellant is a lessee by virtue of the said instrument. The court is
disabled from using the instrument as evidence....
But this above finding does not exhaust the scope of the issue whether
Appellant is a lessee of the building. A lease of immovable property is
defined in Section 105 of the TP Act. A transfer of a right to enjoy a property
in consideration of a price paid or promised to be rendered periodically or on
specified occasions is the basic fabric for a valid lease. The provision says
that such a transfer can be made expressly or by implication. Once there is
such a transfer of right to enjoy the property a lease stands created. What is
mentioned in the three paragraphs of the first part of Section 107 of the TP
Act are only the different modes of how leases are created.... Thus, de hors
the instrument parties can create a lease as envisaged in the second
paragraph of Section 107 which reads thus: All other leases of immovable
property may be made either by a registered instrument or by oral agreement
accompanied by delivery of possession.

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 When lease is a transfer of a right to enjoy the property and such transfer
can be made expressly or by implication, the mere fact that an unregistered
instrument came into existence would not stand in the way of the court to
determine whether there was in fact a lease otherwise than through such
deed.
(Emphasis laid by this Court)
1 4 . The learned senior Counsel further contends that where a lease deed or
document of tenancy in respect of the property in question is for a period exceeding
one year, but such document has not been registered, then, by virtue of payment of
rent, the relationship of tenancy between a landlord and the tenant comes into
existence and in such cases, the tenant must be deemed to be a tenant from month to
month and the same would amount to a tenancy from month to month. Thus, in the
instant case, the tenancy of the Appellants in respect of the property in question
which is the secured asset of the Bank being from month to month would also be
protected under the provisions of the Rent Control Act.
15. The learned senior Counsel further contends that according to the decision of this
Court in the case of Harshad Govardhan Sondagar (supra), if a person claiming to
be a tenant or lessee either produces a registered agreement or relies on an oral
agreement accompanied by delivery of possession, then such tenancy/possession of
the property with the Appellant as tenant needs to be protected. It is further
contended that the Harshad Govardhan Sondagar (supra) has clearly held that the
tenancy claims of the tenants are to be decided by the Chief Metropolitan Magistrate
in accordance with any other law that may be relevant after giving an opportunity of
hearing to the persons who claim tenancy in respect of such property. The term "any
other law that may be relevant" clearly indicates a reference to the State Rent
Protection laws, which in the case at hand is the Rent Control Act. Thus, the
protection of the State Rent Control legislation is also to be considered by the learned
magistrate while deciding an application filed by the Bank Under Section 14 of the
SARFAESI Act.
16. On the other hand, Mr. Amarendra Sharan, learned senior Counsel appearing on
behalf of the Respondents in Crl. A. @ S.L.P. (Crl) Nos. 6941, 6944 and 6945 of 2015
contends that the pith and substance of the central enactment in the instant case,
which is the SARFAESI Act needs to be appreciated. Proper implementation of the
provisions of the SARFAESI Act is in the larger interest of the nation. The learned
senior Counsel places reliance on a Constitution Bench decision of this Court in the
case of Ishwari Khetan Sugar Mills Pvt. Ltd. and Ors. v. State of Uttar
Pradesh and Ors. MANU/SC/0069/1980 : (1980) 4 SCC 136, wherein it was held as
under:
13. If in pith and substance a legislation falls within one entry or the other
but some portion of the subject-matter of the legislation incidentally trenches
upon and might enter a field under another List, the Act as a whole would be
valid notwithstanding such incidental trenching. This is well established by a
catena of decisions [see Union of India v. H.S. Dhillon and Kerala State
Electricity Board v. Indian Aluminium Co.] After referring to these decisions in
State of Karnataka v. Ranganatha Reddy and Anr. Untwalia, J. speaking for
the Constitution Bench has in terms stated that the pith and substance of the
Act has to be looked into and an incidental trespass would not invalidate the
law. The challenge in that case was to the Nationalisation of contract
carriages by the Karnataka State, inter alia, on the ground that the statute
was invalid as it was a legislation on the subject of interstate trade and
commerce. Repelling this contention the Court unanimously held that in pith

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 and substance the impugned legislation was for acquisition of contract
carriages and not an Act which deals with inter-State trade and commerce.
17. The learned senior Counsel further contends that the SARFAESI Act was enacted
by the Parliament under Entry 45 of List I of the Constitution of India. It is a special
Act with a special purpose and procedure laid down for the recovery of the secured
asset of the debtor by the Bank to recover the amount due to it, and thus, any
encroachment upon this Act should not be permitted, as it would defeat the laudable
object of the Act, which has been enacted keeping in view the larger public interest.
1 8 . Mr. Vikas Singh, the learned senior Counsel appearing on behalf of the
Respondent State Bank of India in the appeal arising out of S.L.P. (C) No. 28040 of
2015 contends that the SARFAESI Act cannot be allowed to fail at the hands of the
present Appellants, who have no registered instrument of lease.
19. The learned senior Counsel further contends that in light of the decision of this
Court in the case of Harshad Govardhan Sondagar (supra), the present case is
barred by res judicata. He places reliance on the three Judge Bench decision of this
Court in the case of Bhanu Kumar Jain v. Archana Kumar and Anr.
MANU/SC/1079/2004 : (2005) 1 SCC 787, wherein it was held as under:
It is now well-settled that principles of res judicata applies in different stages
of the same proceedings.
19. In Y.B. Patil (supra) it was held:
4....It is well settled that principles of res judicata can be invoked
not only in separate subsequent proceedings, they also get attracted
in subsequent stage of the same proceedings. Once an order made in
the course of a proceeding becomes final, it would be binding at the
subsequent state of that proceeding....
20. In Vijayabai (supra), it was held:
1 3 . We find in the present case the Tahsildar reopened the very
question which finally stood concluded, viz., whether Respondent 1
was or was not the tenant of the suit land. He further erroneously
entered into a new premise of reopening the question of validity of
the compromise which could have been in issue if at all in appeal or
revision by holding that compromise was arrived at under pressure
and allurement. How can this question be up for determination when
this became final under this very same statute?....
21. Yet again in Hope Plantations Ltd. (supra), this Court laid down the law
in the following terms:
17....One important consideration of public policy is that the
decisions pronounced by courts of competent jurisdiction should be
final, unless they are modified or reversed by appellate authorities;
and the other principle is that no one should be made to face the
same kind of litigation twice over, because such a process would be
contrary to considerations of fair play and justice.
20. Mr. M.T. George, the learned Counsel appearing on behalf of the Bank in the
appeal arising out of S.L.P. (C) No. 12772 of 2015 contends that the tenancy has not
been determined conclusively, as the documents produced on record to prove the

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relationship of tenancy are not registered and do not hold much water. Mr. Rajeev
Kumar Pandey, the learned Counsel appearing on behalf of the Respondent Bank in
the appeal arising out of S.L.P. (C) No. 31080 of 2015 submits that the property in
question was mortgaged before it was leased. Such a lease would thus, not entitle
the lessee to stop the bank from taking possession over the property which was
mortgaged to it.
21. The other learned Counsel appearing on behalf of other Banks in the connected
appeals adopted the arguments advanced by the aforesaid learned senior Counsel
appearing on behalf of some of the Banks. It was also contended that the Appellants
in the connected appeals have not been able to produce sufficient documentary
evidence to prove that they are tenants in respect of the properties in question in the
proceedings Under Section 14 of the SARFAESI Act and hence, they have no locus
standi to prefer the above appeals questioning the correctness of the Order passed by
the learned Magistrate.
We have carefully considered the above rival legal submissions made on behalf of the
parties and answer the same as hereunder:
2 2 . The SARFAESI Act, which came into force from 21.06.2002, was enacted to
provide procedures to the Banks to recover their security interest from the debtors
and their collateral security assets as provided under the provisions of the Act. The
scope of the Act was explained by this Court in the case of Transcore v. Union of
India and Anr. MANU/SC/5319/2006 : (2008) 1 SCC 125 as under:
1 2 . The NPA Act, 2002 is enacted to regulate securitization and
reconstruction of financial assets and enforcement of security interest and for
matters connected therewith. The NPA Act enables the banks and FIs to
realize long-term assets, manage problems of liquidity, asset-liability
mismatch and to improve recovery of debts by exercising powers to take
possession of securities, sell them and thereby reduce non-performing assets
by adopting measures for recovery and reconstruction. The NPA Act further
provides for setting up of asset reconstruction companies which are
empowered to take possession of secured assets of the borrower including
the right to transfer by way of lease; assignment or sale. The said Act also
empowers the said asset reconstruction companies to take over the
management of the business of the borrower....
13. Non-performing assets (NPA) are a cost to the economy. When the Act
was enacted in 2002, the NPA stood at Rs. 1.10 lakh crores. This was a drag
on the economy. Basically, NPA is an account which becomes non-viable and
non-performing in terms of the guidelines given by RBI. As stated in the
Statement of Objects and Reasons, NPA arises on account of mismatch
between asset and liability. The NPA account is an asset in the hands of the
bank or FI. It represents an amount receivable and realizable by the banks or
FIs. In that sense, it is an asset in the hands of the secured creditor.
Therefore, the NPA Act, 2002 was primarily enacted to reduce the non-
performing assets by adopting measures not only for recovery but also for
reconstruction. Therefore, the Act provides for setting up of asset
reconstruction companies, special purpose vehicles, asset management
companies, etc. which are empowered to take possession of secured assets
of the borrower including the right to transfer by way of lease, assignment or
sale. It also provides for realization of the secured assets. It also provides
for takeover of the management of the borrower Co.

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Thus, it becomes clear that the SARFAESI Act is meant to operate as a tool for banks
and ensures a smooth debt recovery process. The provisions of SARFAESI Act make
its purport amply clear, specifically under the provisions of Sections 13(2) and 13(4)
of the Act, which read as under:
13. Enforcement of Security interest.-
(2) Where any borrower, who is under a liability to a secured
creditor under a security agreement, makes any default in repayment
of secured debt or any instalment thereof, and his account in respect
of such debt is classified by the secured creditor as non-performing
asset, then, the secured creditor may require the borrower by notice
in writing to discharge in full his liabilities to the secured creditor
within sixty days from the date of notice failing which the secured
creditor shall be entitled to exercise all or any of the rights Under
Sub-section (4).
(4) In case the borrower fails to discharge his liability in full within
the period specified in Sub-section (2), the secured creditor may
take recourse to one or more of the following measures to recover
his secured debt, namely:
(a) take possession of the secured assets of the borrower
including the right to transfer by way of lease, assignment
or sale for realising the secured asset....
Further, the provision Under Section 35 of the SARFAESI Act provides that it shall
override all other laws, which is quoted as hereunder:
35. The provisions of this Act to override other laws.- The provisions
of this Act shall have effect, notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or any instrument
having effect by virtue of any such law.
Providing a smooth and efficient recovery procedure to enable the banks to recover
the Non Performing Assets is a laudable object indeed, which needs to be ensured for
the development of the economy of the Country. What has complicated the matters,
however, is the clash of this laudable object with another laudable object, namely, to
secure the rights of the tenants under the various Rent Control Acts. The history of
these Rent Control Acts can be traced to as far back as the Second World War. At that
time, due to the massive inflation and shortage of commodities, not only had the cost
of living risen exponentially, the tenants were also often left to the mercy of the
landlords as far as evictions or prices of rent were concerned. Rent Control Acts have
been enacted by the different state legislatures to secure the rights of the weaker
sections of the society, viz., the tenants. Justice Krishna Iyer aptly observed in the
case of Miss Santosh Mehta v. Om Prakash and Ors. MANU/SC/0476/1980 :
(1980) 3 SCC 610:
2 . Rent Control laws are basically designed to protect tenants because
scarcity of accommodation is a nightmare for those who own none and if
evicted, will be helpless.
23. The preamble of the Rent Control Act reads as under:
An Act to unify, consolidate and amend the law relating to the control of rent
and repairs of certain premises and of eviction and for encouraging the

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 construction of new houses by assuring a fair return on the investment by
landlords and to provide for the matters connected with the purposes
aforesaid....
It becomes clear from a perusal of the preamble of the Act that the ultimate object
behind the enactment of this legislation is to control and regulate the rate of rent so
that unnecessary hardship is not caused to the tenant, and also to provide protection
to the tenants against arbitrary and unreasonable evictions from the possession of
the property. The protection of the tenants against unjust evictions becomes even
more pronounced when examined in the light of Section 15 of the Rent Control Act,
which reads as under:
15. No ejectment ordinarily to be made if tenant pays or is ready
and willing to pay standard rent and permitted increases. (1) A
landlord shall not be entitled to the recovery of possession of any premises
so long as the tenant pays, or is ready and willing to pay, the amount of the,
standard rent and permitted increases, if any, and observes and performs the
other conditions of the tenancy, in so far as they are consistent with the
provisions of this Act.
Section 15, thus, restricts the right of a landlord to recover possession of the
tenanted premises from a tenant.
24. When we understand the factual matrix in the backdrop of the objectives of the
above two legislations, the controversy in the instant case assumes immense
significance. There is an interest of the bank in recovering the Non Performing Asset
on the one hand, and protecting the right of the blameless tenant on the other. The
Rent Control Act being a social welfare legislation, must be construed as such. A
landlord cannot be permitted to do indirectly what he has been barred from doing
under the Rent Control Act, more so when the two legislations, that is the SARFAESI
Act and the Rent Control Act operate in completely different fields. While SARFAESI
Act is concerned with Non Performing Assets of the Banks, the Rent Control Act
governs the relationship between a tenant and the landlord and specifies the rights
and liabilities of each as well as the rules of ejectment with respect to such tenants.
The provisions of the SARFAESI Act cannot be used to override the provisions of the
Rent Control Act. If the contentions of the learned Counsel for the Respondent Banks
are to be accepted, it would render the entire scheme of all Rent Control Acts
operating in the country as useless and nugatory. Tenants would be left wholly to the
mercy of their landlords and in the fear that the landlord may use the tenanted
premises as a security interest while taking a loan from a bank and subsequently
default on it. Conversely, a landlord would simply have to give up the tenanted
premises as a security interest to the creditor banks while he is still getting rent for
the same. In case of default of the loan, the maximum brunt will be borne by the
unsuspecting tenant, who would be evicted from the possession of the tenanted
property by the Bank under the provisions of the SARFAESI Act. Under no
circumstances can this be permitted, more so in view of the statutory protections to
the tenants under the Rent Control Act and also in respect of contractual tenants
along with the possession of their properties which shall be obtained with due
process of law.
25. The issue of determination of tenancy is also one which is well settled. While
Section 106 of the Transfer of Property Act, 1882 does provide for registration of
leases which are created on a year to year basis, what needs to be remembered is the
effect of non-registration, or the creation of tenancy by way of an oral agreement.
According to Section 106 of the Transfer of Property Act, 1882, a monthly tenancy

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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 nugatory. If no written lease
deed exists, then such tenants are required to prove that they have been in
occupation of the premises as tenants by producing such evidence in the proceedings
Under Section 14 of the SARFAESI Act before the learned Magistrate. Further, in
terms of Section 55(2) of the special law in the instant case, which is 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. Further, the learned Counsel for
the Appellants rightly placed reliance on a three Judge Bench decision of this Court in
Anthony (supra). At the cost of repetition, in that case it was held as under:
But the above finding does not exhaust the scope of the issue whether the
Appellant was a lessee of the building. A lease of immovable property is
defined in Section 105 of the TP Act. A transfer of a right to enjoy a property
in consideration of a price paid or promised to be rendered periodically or on
specified occasions is the basic fabric for a valid lease. The provision says
that such a transfer can be made expressly or by implication. Once there is
such a transfer of right to enjoy the property a lease stands created. What is
mentioned in the three paragraphs of the first part of Section 107 of the TP
Act are only the different modes of how leases are created. The first
paragraph has been extracted above and it deals with the mode of creating
the particular kinds of leases mentioned therein. The third paragraph can be
read along with the above as it contains a condition to be complied with if
the parties choose to create a lease as per a registered instrument mentioned
therein.
All other leases, if created, necessarily fall within the ambit of the second
paragraph. Thus, de hors the instrument parties can create a lease as
envisaged in the second paragraph of Section 107 which reads thus:
All other leases of immovable property may be made either by a registered
instrument or by oral agreement accompanied by delivery of possession.
26. It further saddens us to see the manner in which the decision in the case of
Harshad Govardhan Sondagar (supra) has been misinterpreted to create this
confusion. Random sentences have been picked up from the judgment and used,
without any attempt to understand the true purport of the judgment in its entirety.
27. It is a well settled position of law that a word or sentence cannot be picked up
from a judgment to construe that it is the ratio decidendi on the relevant aspect of
the case. It is also a well settled position of law that a judgment cannot be read as a
statute and interpreted and applied to fact situations. An eleven Judge Bench of this
Court in the case of H.H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia
Bahadur of Gwalior and Ors. v. Union of India MANU/SC/0050/1970 : (1971) 1
SCC 85 held as under:
It is difficult to regard a word, a clause or a sentence occurring in a
judgment of this Court, divorced from its context, as containing a full
exposition of the law on a question when the question did not even fall to be
answered in that judgment.

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The same view was reiterated by a Division Bench of this Court in the case of
Commissioner of Income Tax v. Sun Engineering Works (P.) Ltd.
MANU/SC/0707/1992 : (1992) 4 SCC 363 Further, a three Judge Bench of this Court
in the case of Union of India v. Dhanawanti Devi and Ors. MANU/SC/1272/1996
: (1996) 6 SCC 44 held as under:
9. It is not everything said by a Judge while giving judgment that constitutes
a precedent. The only thing in a judge's decision binding a party is the
principle upon which the case is decided and for this reason it is important to
analyse a decision and isolate from it the ratio decidendi. According to the
well-settled theory of precedents, every decision contains three basic
postulates - (i) findings of material facts, direct and inferential. An inferential
finding of facts is the inference which the Judge draws from the direct, or
perceptible facts; (ii) statements of the principles of law applicable to the
legal problems disclosed by the facts; and (iii) judgment based on the
combined effect of the above. A decision is only an authority for what it
actually decides. What is of the essence in a decision is its ratio and not
every observation found therein nor what logically follows from the various
observations made in the judgment. Every judgment must be read as
applicable to the particular facts proved, or assumed to be proved, since the
generality of the expressions which may be found there is not intended to be
exposition of the whole law, but governed and qualified by the particular
facts of the case in which such expressions are to be found. It would,
therefore, be not profitable to extract a sentence here and there from the
judgment and to build upon it because the essence of the decision is its ratio
and not every observation found therein. The enunciation of the reason or
principle on which a question before a court has been decided is alone
binding as a precedent. The concrete decision alone is binding between the
parties to it, but it is the abstract ratio decidendi, ascertained on a
consideration of the judgment in relation to the subject matter of the
decision, which alone has the force of law and which, when it is clear what it
was, is binding. It is only the principle laid down in the judgment that is
binding law Under Article 141 of the Constitution. A deliberate judicial
decision arrived at after hearing an argument on a question which arises in
the case or is put in issue may constitute a precedent, no matter for what
reason, and the precedent by long recognition may mature into rule of stare
decisis. It is the rule deductible from the application of law to the facts and
circumstances of the case which constitutes its ratio decidendi.
10. Therefore, in order to understand and appreciate the binding force of a
decision it is always necessary to see what were the facts in the case in
which the decision was given and what was the point which had to be
decided. No judgment can be read as if it is a statute. A word or a clause or
a sentence in the judgment cannot be regarded as a full exposition of law.
Law cannot afford to be static and therefore, Judges are to employ an
intelligent technique in the use of precedents...
(Emphasis laid by this Court)
2 8 . The decision of this Court rendered in the case of Harshad Govardhan
Sondagar (supra) cannot be understood to have held that the provisions of the
SARFAESI Act override the provisions of the Rent Control Act, and that the Banks are
at liberty to evict the tenants residing in the tenanted premises which have been
offered as collateral securities for loans on which default has been done by the
debtor/landlord.

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29. As far as granting leasehold rights being created after the property has been
mortgaged to the bank, the consent of the creditor needs to be taken. We have
already taken this view in the case of Harshad Govardhan Sondagar (supra). We
have not stated anything to the effect that the tenancy created after mortgaging the
property must necessarily be registered under the provisions of the Registration Act
and the Stamp Act.
3 0 . It is a settled position of law that 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. A tenant cannot be arbitrarily evicted by using the
provisions of the SARFAESI Act as that would amount to stultifying the statutory
rights of protection given to the tenant. A non obstante Clause (Section 35 of the
SARFAESI Act) cannot be used to bulldoze the statutory rights vested on the tenants
under the Rent Control Act. The expression 'any other law for the time being in force'
as appearing in Section 35 of the SARFAESI Act cannot mean to extend to each and
every law enacted by the Central and State legislatures. It can only extend to the
laws operating in the same field. Interpreting the non obstante clause of the
SARFAESI Act, a three Judge Bench of this Court in the case ofCentral Bank of
India v. State of Kerala and Ors. MANU/SC/0306/2009 : (2009) 4 SCC 94 has
held as under:
18. The DRT Act and Securitisation Act were enacted by Parliament in the
backdrop of recommendations made by the Expert Committees appointed by
the Central Government for examining the causes for enormous delay in the
recovery of dues of banks and financial institutions which were adversely
affecting fiscal reforms. The committees headed by Shri T. Tiwari and Shri M.
Narasimham suggested that the existing legal regime should be changed and
special adjudicatory machinery be created for ensuring speedy recovery of
the dues of banks and financial institutions. Narasimham and Andhyarujina
Committees also suggested enactment of new legislation for securitisation
and empowering the banks etc. to take possession of the securities and sell
them without intervention of the Court.
XXX XXX XXX
110. The DRT Act facilitated establishment of two-tier system of Tribunals.
The Tribunals established at the first level have been vested with the
jurisdiction, powers and authority to summarily adjudicate the claims of
banks and financial institutions in the matter of recovery of their dues
without being bogged down by the technicalities of the Code of Civil
Procedure. The Securitisation Act drastically changed the scenario inasmuch
as it enabled banks, financial institutions and other secured creditors to
recover their dues without intervention of the Courts or Tribunals. The
Securitisation Act also made provision for registration and Regulation of
securitisation/reconstruction companies, securitisation of financial assets of
banks and financial institutions and other related provisions.
1 1 1 . However, what is most significant to be noted is that there is no
provision in either of these enactments by which first charge has been
created in favour of banks, financial institutions or secured creditors qua the
property of the borrower.
112. Under Section 13(1) of the Securitisation Act, limited primacy has been
given to the right of a secured creditor to enforce security interest vis-a-vis
Section 69 or Section 69A of the Transfer of Property Act. In terms of that

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 Sub-section, a secured creditor can enforce security interest without
intervention of the Court or Tribunal and if the borrower has created any
mortgage of the secured asset, the mortgagee or any person acting on his
behalf cannot sell the mortgaged property or appoint a receiver of the
income of the mortgaged property or any part thereof in a manner which may
defeat the right of the secured creditor to enforce security interest. This
provision was enacted in the backdrop of Chapter VIII of Narasimham
Committee's 2nd Report in which specific reference was made to the
provisions relating to mortgages under the Transfer of Property Act.
1 1 3 . In an apparent bid to overcome the likely difficulty faced by the
secured creditor which may include a bank or a financial institution,
Parliament incorporated the non obstante clause in Section 13 and gave
primacy to the right of secured creditor vis a vis other mortgagees who could
exercise rights Under Sections 69 or 69A of the Transfer of Property Act.
However, this primacy has not been extended to other provisions like Section
38C of the Bombay Act and Section 26B of the Kerala Act by which first
charge has been created in favour of the State over the property of the dealer
or any person liable to pay the dues of sales tax, etc.
..................
116. The non obstante clauses contained in Section 34(1) of the DRT Act
and Section 35 of the Securitisation Act give overriding effect to the
provisions of those Acts only if there is anything inconsistent contained in
any other law or instrument having effect by virtue of any other law. In other
words, if there is no provision in the other enactments which are inconsistent
with the DRT Act or Securitisation Act, the provisions contained in those Acts
cannot override other legislations.
(Emphasis laid by this Court)
3 1 . If the interpretation of the provisions of SARFAESI Act as submitted by the
learned senior Counsel appearing on behalf of the Banks is accepted, it would not
only tantamount to violation of rule of law, but would also render a valid Rent
Control statute enacted by the State Legislature in exercise of its legislative power
Under Article 246(2) of the Constitution of India useless and nugatory. The
Constitution of India envisages a federal feature, which has been held to be a basic
feature of the Constitution, as has been held by the seven Judge Bench of this Court
in the case of S.R. Bommai and Ors. v. Union of India MANU/SC/0444/1994 :
(1994) 3 SCC 1, wherein Justice K. Ramaswamy in his concurring opinion elaborated
as under:
247. Federalism envisaged in the Constitution of India is a basic feature in
which the Union of India is permanent within the territorial limits set in
Article 1 of the Constitution and is indestructible. The State is the creature of
the Constitution and the law made by Articles 2 to 4 with no territorial
integrity, but a permanent entity with its boundaries alterable by a law made
by Parliament. Neither the relative importance of the legislative entries in
Schedule VII, Lists I and II of the Constitution, nor the fiscal control by the
Union per se are decisive to conclude that the Constitution is unitary. The
respective legislative powers are traceable to Articles 245 to 254 of the
Constitution. The State qua the Constitution is federal in structure and
independent in its exercise of legislative and executive power. However,
being the creature of the Constitution the State has no right to secede or
claim sovereignty. Qua the Union, State is quasi-federal. Both are

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 coordinating institutions and ought to exercise their respective powers with
adjustment, understanding and accommodation to render socio-economic
and political justice to the people, to preserve and elongate the constitutional
goals including secularism.
248. The preamble of the Constitution is an integral part of the Constitution.
Democratic form of Government, federal structure, unity and integrity of the
nation, secularism, socialism, social justice and judicial review are basic
features of the Constitution.
(Emphasis laid by this Court)
32. In view of the above legal position, if we accept the legal submissions made on
behalf of the Banks to hold that the provisions of SARFAESI Act override the
provisions of the various Rent Control Acts to allow a Bank to evict a tenant from the
tenanted premise, which has become a secured asset of the Bank after the default on
loan by the landlord and dispense with the procedure laid down under the provisions
of the various Rent Control Acts and the law laid down by this Court in catena of
cases, then the legislative powers of the state legislatures are denuded which would
amount to subverting the law enacted by the State Legislature. Surely, such a
situation was not contemplated by the Parliament while enacting the SARFAESI Act
and therefore the interpretation sought to be made by the learned Counsel appearing
on behalf of the Banks cannot be accepted by this Court as the same is wholly
untenable in law.
33. We are unable to agree with the contentions advanced by the learned Counsel
appearing on behalf of the Respondent Banks.
34. In view of the foregoing, the impugned judgments and orders passed by the High
Court/Chief Metropolitan Magistrate are set aside and the appeals are allowed. We
further direct that the amounts which are in deposit pursuant to the conditional
interim order of this Court towards rent either before the Chief Metropolitan
Magistrate/Magistrate Court or with the concerned Banks, shall be adjusted by the
concerned Banks towards the debt due from the debtors/landlords in respect of the
Appellants in these appeals. The enhanced rent by way of conditional interim order
shall be continued to be paid to the respective Banks, which amount shall also be
adjusted towards debts of the debtors/landlords. All the pending applications are
disposed of.
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