The Kerala High Court on Monday, 20 July 2015 in a judgment titled ‘M/s. Three Line Properties Vs. V.K. Sreeram Madhavan‘ has observed that “in view of the law laid down by the Apex Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Ltd. (2014(3) KLT 357 (SC), the Chief Judicial Magistrate has to examine the claim of each lessee and take a decision as to whether possession of secured assets from such lessee can be taken or not.
A bench comprised of Chief Justice Ashok Bhushan and Justice A.M. Shaffique held that the appropriate procedure for the Chief Judicial Magistrate was to recall the earlier order and thereafter give an opportunity to the parties to place the respective claim and thereafter to decide the matter”.
Lessee in Lawful Possession
The parties have placed reliance on Harshad Govardhan Sandagar’s case (supra), in which case the Apex Court had occasion to consider the provisions of the Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002), Transfer of Property Act, 1882 and all aspects of the matter regarding taking possession from the lessees/tenants occupying the mortgaged assets. The Apex Court held in the above case that possession of the secured asset from a lessee in lawful possession under a valid lease is not required to be taken under the provisions of the SARFAESI Act. It was further held that whenever a secured creditor moves the Chief Metropolitan Magistrate or the District Magistrate for assistance to take possession of the secured asset, he must state in the affidavit accompanying the application that the secured asset is not in possession of a lessee under the valid lease.
The Apex Court further held that no remedy is available under Section 17 of the SARFAESI Act, 2002 to the lessee to protect his lawful possession under a valid lease. In paragraph 36 it was held that when the lessees claim that they are entitled to possession of a secured asset for any term exceeding one year from the date of the lease, the Chief Metropolitan Magistrate or the District Magistrate will have to come to the conclusion regarding entitlement.
The Court viewed that appropriate opportunity was not given to the petitioners by the Chief Judicial Magistrate to place their case. Appropriate opportunity was necessary, since the Bank in its application under Section 14 had not given details of the lessees of the premises. In view of the judgment of the Apex Court relied on by the petitioners in Harshad Govardhan Sondagar’s case (supra), it was obligatory for the Bank to give details of the lessees in their application. That was another reason due to which the Chief Judicial Magistrate ought to have given opportunity to the petitioners as well as the Bank to bring relevant material on record.
While dismissing the Writ Appeal the Court does not find any error in the judgment of the learned Single Judge directing the Magistrate to take a fresh decision after hearing learned counsel for the petitioners as well as the purchaser.
“The judgment of the learned Single Judge needs no interference in this appeal. The Writ Appeal is, thus, dismissed. The appeal being dismissed today, the Chief Judicial Magistrate may take a fresh decision as directed by the learned Single Judge within four weeks from today. The parties shall bear their own costs”, the Court ruled.