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Rock (Specialist)     10 April 2012

House auctioned and tenants

Hi,

We have a case in which 4 tenants were staying in a house with an lease agreement for 3 years. however, the owner of the building had availed housing loan from a bank  and did not repay,..so the bank has siezed and auctioned the property. So what should be the right of the tenants living in that building..

1. Is it possible that they will be vacated by the bank without settling their lease amount?

2 . What steps tenants should take to recover the money?



Learning

 4 Replies


(Guest)

It is important to know the terms of tenancy. It is also important to know the terms of proclamation of sale. However, in general, if the tenancy if genuine and validly made as per law, the tenancy right will be protected. If the tenancy is created for avoiding the payment to the creditor, the successful bidder will become entitle to evict the tenant as per law.

c.p.s. ramachary (1500)     10 April 2012

Your query is not clear about nature, commencement, date of lease and its duration. However following is the legal position and you have workout your problem in the light of the clarifications given in the citations:

No lessee can claim any protection unless his tenancy is as per the requirements of section 65-A of T.P. Act: Prakash Agarwal vs. Sapna Diksh*t & Ors: 2010(1) DRTC 440 DRAT All. Unregistered  lease  in contravention  of  sec  65A  of  TP  Act  cannot  be  pressed  into  service  for  any  protection  by  an occupier: Pankaj Kumar Chandulal Antala Vs Central Bank of India, 2009 TLGJ 2358 (Guj).

A bona fide tenant or lessee cannot be dispossessed under Sec 14 of the Act without following due process of law (Hutchison Essar South Ltd. Vs. Union Bank Of India : AIR 2008 Kar.14). Karnataka High Court further held in the cited case that, a bona fide tenant / lessee can not be thrown out by invoking Sec.13 and 14 of SARFAESI Act. Unregistered lease deed does not impair the jural relationship between landlord and his tenant. Therefore the secured creditor has to take only symbolic possession. The secured creditor has to follow due process of law for eviction of the tenant if he wishes to do so. This view is reiterated again by the High Court in another decision in Nitco Roadways (Pvt.) Ltd. Vs. Punjab National Bank : 2010 (2) KCCR 1402. Provisions of SARFAESI Act do not empower secured creditor to dispossess a lawful tenant (Kalyani Sales Co.& Anr. Vs. Union of India & Anr.: 2006(1) BC (DB) (Punjab & Haryana High Court). When the mortgager himself cannot evict a tenant, the secured creditor cannot evict the lessee without following the due process of law.   A pre-existing tenancy cannot be extinguished by exercising right to take possession under Sec.13(4) of SARFAESI Act as the same is not authorised in the Act (Dena Bank  Vs. Shri Sihor Nagarik Sahakari Bank Ltd. & Ors. AIR 2008 Guj.110). None of the provisions of SARFAESI Act authorise the bank to recover possession from the tenant under the borrower in the mortgaged property in the process of recovery of its dues (UCo Bank Vs. Samar Sarkar & Ors. AIR 2008 Cal.9). If the secured asset is leased out to a third party the bank cannot take physical possession. Symbolic possession alone can be taken subject to the lease hold rights of the lessee.

Rock (Specialist)     10 April 2012

Hi, Thanks for the detailed explanation,

More information on the case:

Tenants are staying in the house from august 2007(1st term of 3 years has been completed) and agreement has been renewed for 3 more years till august 2013

In october 2011 bank has issued a public notice and owner staying in the same building has been vacated by the bank before auction. Tenants were given notice to vacate.

In November 2011, auction has been held and auction purchaser has recieved the sale certificate from the bank

But the old owener has been moved to a different vacant floor of the same property and showing the bank as he is a paying guest when the came to vacate him again...till April 20, the auction purchaser has time to register the property.

 

Questions:

Whose responsibility is to vacate the owner.?

tenants moved to DRT court and the judjment was: since the lease agreement is UNREGISTERED auction purchaser can settle the lease amount with mutial understanding, or he can fight legally. can bank do any thing at this point of time?

auction purchaser has agreed to settle the tenants amount, however asking for a legal attachment from the court to get the surpulus amount in the bank(After clearing old owner's loan). Is this a right move?

Rock (Specialist)     11 April 2012

Hi,

Anyone has any comments on my above query?


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