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Tenancy right entered into on basis of oral agreement is barred; directed to handover possession to bank

September 13, 2019[2019] 109 taxmann.com 171 (SC)
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FEMA, Insurance & Banking: Where appellant-tenant sought for stay of execution of order passed under section 14 of SARFAESI Act for taking possession of property which was let out to appellant by respondent no. 2 borrower/landlord before mortgage deed was entered between borrower and bank, it was held that bona fides of tenant was highly doubtful, as there was no good or sufficient evidence to establish tenancy which was based on oral agreement and not supported by registered instrument and, therefore, lower Courts were correct in ordering delivery of possession to respondent no. 1 bank as tenancy stood determined

• Section 13(13) of SARFAESI Act bars entering into tenancy on basis of oral agreement beyond January, 2012. After issuance of notice under section 13(2) of SARFAESI Act, subsequent reckoning of the tenancy is barred. Such person occupying the premises, when the tenancy has been determined, can only be treated as a 'tenant in sufferance'. Such tenants do not have any legal rights and are akin to trespassers.

• The operation of the Rent Act cannot be extended to a 'tenant-in-sufferance' vis-a-vis the SARFAESI Act, due to the operation of section 13(2), read with section 13(13) of the SARFAESI Act. A contrary interpretation would violate the intention of the legislature to provide for section 13(13), which has a valuable role in making the SARFAESI Act a self-executory instrument for debt recovery. Moreover, such an interpretation would also violate the mandate of section 35, SARFAESI Act which is couched in broad terms.

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