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dipankarsana   10 June 2015

Section 31 of sarfaesi act

Hello All,

Just wanted to clarify few things about section 31 of SARFAESI act.

1. Can an unsecured loan (education loan) be taken into consideration into this act ?

2. any case in which the amount due is less than twenty per cent of the principal amount and interest thereon. What does this mean ?

Bank has rescheduled my education loan without me requesting them. 

Please clariffy these query and recommend legal steps available for this.

Thanks in advance.


 2 Replies

Uday (Lawyer)     18 June 2015

I would like to reply to the first part of your question.

The bank cannot proceed under the SARFAESI Act for unsecured loan.

I'm not sure about the 2nd question. You may personally message to Mr.C.P.S.Ramachary regarding this who will be in a position to clarify.

c.p.s. ramachary (1500)     23 June 2015

Non-registration of the lease deed is not fatal to the creation of the lease. (Anthony v. K.C. Ittoop and Sons and Ors. AIR 2000 SC 3523). But its non-registration does not come in the way of existence of the jural relationship of a lessor and a lessee. Non-registration may have other consequences for the parties. In the case of Samir Mukherjee (supra) the Hon'ble Supreme Court has taken a considered view that, the existence of the valid lease is a prerequisite for the purpose of invoking rule of constructions and deeming provisions embodied in Section 106 of the Transfer of Property Act. In the absence of a registered instrument no valid lease from year to year or for a term exceeding one year or reserving a yearly rent can be created. If the lease is not a valid lease within the meaning of the opening words of Section 106 of the Transfer of Property Act and in the wake of non-registration of the lease agreement, it can only be said that the lease is terminable without issuing the advance notice to the tenant vice versa. Even assuming that there are some irregularities in inducting the petitioner into the aforesaid premises, they do not make it an unauthorised occupant, much less a trespasser. A close glance at Sec.13 (1) of the SARFAESI Act makes it obvious that, Sec.65A is not excluded as in case of Secs.69 & 69A of T.P. Act. Hence Sec 65A has no overriding effect as it is not inconsistent. Further, lease (including the relationship of land lord and tenant ) is    “State Subject”  covered by Entry no.18 in List-II  (“State List”) over which State Legislature alone has power to legislate and Parliament cannot encroach  and make law on the State Subjects.

In Harshad Govardhan Sondagar’s case the Hon’ble Supreme Court held that, lease year to year requires registration within the meaning of Sec.107 of TP Act. Hence if the lease is in contravention of provisions of Sec.65A of TP Act (i.e. exceeding 3 years and without registration) cannot protect the tenant if Sec.14 of SARFAESI Act is invoked. Supreme court’s decision is binding on all High Courts, Karnataka High Court’s finding stands overridden i.e. no protection to such tenant. However the Magistrate is conferred with power (jurisdiction) by Supreme Court to hold enquiry and find out if the tenant is bona fide and holds valid lease or not, which the legislators might not have thought over such situation (casus ommissus).

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