# AGME Marketing Pvt. Ltd. &Ors v. Canara Bank &Ors

- **Citation:** (2019) 1 ILRA 1103
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-07-31
- **Case number:** Writ-C No. 16516 of 2019
- **Bench:** Yashwant Varma
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/agme-marketing-pvt-ltd-ors-v-canara-bank-ors-44413
- **Pages:** 26

## Headnote

SARFAESI ACT,2002-Section 14; Transfer
of
Property
Act,1882-Section
65AUnregistered Rent agreement intending
to create an interest over the secured
asset for a period exceeding 3 years
without reserving a right of re-entry - is
violative
of
Section
65-A-Petitioners
cannot resist action of bank.
Viewed in that light it is evident that the lessor
intended to create an interest over the
secured asset for a period exceeding three
years and did not reserve a right of re-entry in
case rent was not paid. Clause-7 is thus
evidently in violation of the injunct comprised
in clause (e) of sub-section (2) also. The Court
consequently
comes
to
the
irresistible
conclusion that the Rent Agreement did not
meet the requirements placed by clauses (a)
and (e) ofSection 65-A(2). (para 24)

B. Transfer of Property Act,1882-Section
107 read with Section 17 and 49 of the
Registration Act,1908-lease exceeding
one
year
has
to
be
compulsorily
registered under Section 107 of the
Act,1882 read with Section 17 and 49 of
the Registration Act,1908.

C. SARFAESI ACT,2002-Section 13(13)-
restrain borrower from transferring by
way of sale, lease or otherwise the
secured asset after receipt of the notice
u/s13(2) without prior written consent
of the secured creditor.

The contention that the statutory restraint
engrafted in Section 13 (13) of the SARFAESI
Act operates only against the lessor/original
debtor is misconceived. The creation of a
tenancy is the formation of a contract based
upon the action of two parties assenting to
enter into a legal relationship. The acceptance
1104 INDIAN LAW REPORTS ALLAHABAD SERIES
of this submission would not only be contrary
to the plain legislative intent infusing that
provision, it would also deprive it of rigour and
purpose.(Para M)

Cases cited: -

## Text

_Characters 0–39,118 of 89,246. This is a partial read: ask again with offset=39118 for what follows._

1 All. AGME Marketing Pvt. Ltd. & Ors. Vs. Canara Bank & Ors.
1103
Officer, Ghaziabad for impounding the
passport of the petitioner has no legs to
stand.

15. In view of the discussion made
here in above, this petition is disposed of
with the direction to the Regional
Passport
Officer,
Ghaziabad
to
reconsider the decision of impounding the
passport of the petitioner, without taking
note of the pendency of a criminal case,
within a period of one month from the
date of presentation of a certified copy of
this order.

16. Before parting with the case, we
feel it necessary in the ends of justice to
direct the concerned Court below to
decide the Criminal Case No. 430 of 2012
under Section 188 and 177 IPC, P.S.
Mawana pending in the Court of Judicial
Magistrate,
Mawana,
Meerut,
in
accordance with law, as expeditiously as
possible, preferably within a period of 6
months from the date of presentation of a
certified copy of this order.

17. Registry of this Court is directed
to send a copy of this order to the learned
District Judge, Meerut for compliance
within a week from today.

18. With the above observations,
this petition stands disposed of.
-------

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 31.07.2019

BEFORE
THE HON'BLE YASHWANT VARMA, J.

Writ-C No. 16516 of 2019

AGME Marketing Pvt. Ltd. &Ors.
 ...Petitioners
Versus
Canara Bank &Ors. ...Respondents

Counsel for the Petitioners:
Sri Rakesh Pande

Counsel for the Respondents:
C.S.C., Sri Kartikeya Saran, Sri Arvind
Srivastava

SARFAESI ACT,2002-Section 14; Transfer
of
Property
Act,1882-Section
65AUnregistered Rent agreement intending
to create an interest over the secured
asset for a period exceeding 3 years
without reserving a right of re-entry - is
violative
of
Section
65-A-Petitioners
cannot resist action of bank.
Viewed in that light it is evident that the lessor
intended to create an interest over the
secured asset for a period exceeding three
years and did not reserve a right of re-entry in
case rent was not paid. Clause-7 is thus
evidently in violation of the injunct comprised
in clause (e) of sub-section (2) also. The Court
consequently
comes
to
the
irresistible
conclusion that the Rent Agreement did not
meet the requirements placed by clauses (a)
and (e) ofSection 65-A(2). (para 24)

B. Transfer of Property Act,1882-Section
107 read with Section 17 and 49 of the
Registration Act,1908-lease exceeding
one
year
has
to
be
compulsorily
registered under Section 107 of the
Act,1882 read with Section 17 and 49 of
the Registration Act,1908.

C. SARFAESI ACT,2002-Section 13(13)-
restrain borrower from transferring by
way of sale, lease or otherwise the
secured asset after receipt of the notice
u/s13(2) without prior written consent
of the secured creditor.

The contention that the statutory restraint
engrafted in Section 13 (13) of the SARFAESI
Act operates only against the lessor/original
debtor is misconceived. The creation of a
tenancy is the formation of a contract based
upon the action of two parties assenting to
enter into a legal relationship. The acceptance
1104 INDIAN LAW REPORTS ALLAHABAD SERIES
of this submission would not only be contrary
to the plain legislative intent infusing that
provision, it would also deprive it of rigour and
purpose.(Para M)

Cases cited: -

1.
Harshad
Goverdhan
Sondagar
v.
International Assets Reconstruction Company
Limited and Others8 and Vishal N. Kalsaria v
Bank of India

2. P.M. Kelukutti And Others v. Young Men's
Christian Association and Others

3. Sanjeev Bansal v. Oman International Bank
SAOG And Other

4.Gajraj Singh Vs. State Transport Appellate
Tribunal

5. Vishal N. Kalsaria Vs. Bank of India and
others

6.Anthony v. K.C. Ittoop & Sons

7.
Sudarshan
Trading
Company
Limited,
Bangalore v.L. D' Souza. (E-4)

(Delivered by Hon'ble Yashwant Varma, J.)

1. Heard Sri Rakesh Pande, learned
Senior Counsel in support of the petition,
Sri Arvind Srivastava, learned counsel has
appeared for the Canara Bank while Sri
Kartikeya Saran addressed submissions
on behalf of the eighth respondent (the
"auction purchaser"). The third and
fourth
respondents
(the
"original
borrowers") although duly served as
evidenced from the Affidavit of Service
filed in these proceedings have not
appeared. Learned Standing Counsel
appeared for the respondent Nos. 5 to 7.

2. The petitioners claim to be tenants
"holding over" pursuant to a lease deed
executed by the original borrowers on 4
April 2012. They assail the order dated 21
February 2019 passed by the Debt
Recovery
Tribunal1
in
proceedings
instituted by Canara Bank2 referable to
Section 14 of the SARFAESI Act, 2002.
Challenge is also laid to the order dated 3
May 2019 as passed by the Debt
Recovery Appellate Tribunal4 upholding
the decision rendered by the DRT. The
challenge before the Tribunal was to the
initiation of action under Section 13 of the
2002 Act by the Bank. The petitioners
assert that since they were tenants holding
over under a valid lease executed in their
favour by the original borrowers, in the
absence of a valid termination of that
tenancy the Bank could not divest them of
possession. Both the D.R.T. as well as the
D.R.A.T. have negatived the objections
raised holding that the lease did not fulfill
the conditions imposed by Section 65A of
the Transfer of Property Act, 18825 and
consequently the petitioners were not
entitled to retain possession of the
premises in question. Before proceeding
to notice the rival submissions advanced,
it would be appropriate to set out the
following essential facts.

3. The original borrowers were
extended various credit facilities by the
Bank. In order to secure repayment of the
loans and credit facilities so sanctioned,
they created an equitable mortgage in
favour of the Bank insofar as the premises
in question are concerned on 24 March
2004. On 4 April 2012, the original
borrowers are stated to have executed a
"Rent Agreement" in favour of the
petitioners. The premises in question
[which shall hereinafter and for the sake
of brevity be referred to as the "secured
asset"] was let out to the petitioners at a
yearly rate of 24,00,000/- and on a
monthly
rent
of
Rs.2,00,000/-.
Admittedly, the Rent Agreement is an
1 All. AGME Marketing Pvt. Ltd. & Ors. Vs. Canara Bank & Ors.
1105
unregistered instrument. The tenure of the
lease was set out in Clause 1, which reads
thus:

"NOW
THIS
DEED
WITNESSETH AS FOLLOWS:

1. In pursuance of the said
agreement and in consideration of rent
hereby
granted
and
the
lessee's
covenants hereinafter mentioned, the
Lessor hereby demise unto the lessee the
demise premises, to hold the demise
premises unto the lessee for a period of 3
years commencing from the 4th day of
April, 2012, at a yearly rent of 24 lakhs
for which it is due, the first of such
yearly rent shall be paid on every 1st
week of the month in installment out of
12 equal installment which is Rs. 2 lakh.
And the subsequent rent shall be paid on
in the above described manner of every
succeeding year regularly."

4. Clause 7 of the Rent Agreement
has an important bearing on the questions
which
have
been
raised
for
the
consideration of the Court and therefore is
extracted herein below:

"7. That this rent agreement is valid
for 3 years but the Lessee or their
assigned shall have the right to continue
the possession of the demise property
until, the cancellation of rent agreement
or unless the Lessee shall pay the all
costs & expenses of the construction or
renovation of the structure of the
property which made by the Lessee on
depreciated
value
of
the
cost
of
construction."

5. The Rent Agreement recites that
the premises had been established by the
original borrowers for the purposes of
processing and treatment of raw hides and
tanned leather. The Rent Agreement conferred
a right on the petitioners here to use the
property as well as the plant and machinery
installed thereon for the purposes of
manufacturing articles and the tanning of raw
hides. The Rent Agreement also conferred a
right on the petitioners to construct and
renovate structures existing within the
premises in question. It is significant to note
that although a monthly rent was reserved, it
did not contain any condition of re-entry. The
issue of cancellation of the Rent Agreement
was governed by Clause 7 exclusively.

6. On 26 May 2012, the loan
account of the original borrowers was
declared to be a Non Performing Asset
(N.P.A.). Consequent thereto the Bank
invoked the provisions of the 2002 Act
and issued a notice under Section 13(2) of
that Act on 9 October 2012. Symbolic
possession of the mortgaged premises is
stated to have been taken on 24 January
2013. The application of the Bank under
Section 14 is was allowed on 2 November
2017. Since the State respondents were
unable to deliver possession, the Bank
instituted Writ Petition No. 38518 of
2018 before this Court. In that writ
petition, the petitioners here moved an
application seeking impleadment. The
petition itself was disposed of on 17
December 2018. The Division Bench
while disposing of the petition issued a
direction
calling
upon
the
District
Collector and other police authorities to
provide necessary aid to the Bank to
enable it to take possession of the secured
asset as expeditiously as possible. Dealing
with the impleadment application which
had been made by the petitioners here, the
Division Bench observed thus:

"At this juncture, an impleadment
application has been filed with regard to
1106 INDIAN LAW REPORTS ALLAHABAD SERIES
the Arazi no. 471 by the AGME
Marketing Private Limited and another
stating therein that they are the tenants of
the
property
vide
agreement
dated
04.04.2012 with the owner and, therefore,
unless they are evicted in accordance with
law, no proceeding for taking over
possession can be initiated by the District
Magistrate
and,
therefore,
they
are
necessary party to be impleaded in this
writ petition.

Learned counsel for the respondents
filed
a
counter
affidavit
to
the
impleadment application stating therein
that they have no locus as they were
subsequent tenant. As the property was
mortgaged on 24.03.2004 with the Bank
the applicants have no right or locus
standi in the secured assets to challenge
the proceedings at this stage.

Sri
Arvind
Srivastava,
learned
counsel for the petitioner has laid
emphasis upon the provision of Section
17 (4) of the Act which prescribes that the
Debt Recovery Tribunal has power even
to decide the tenancy right of any person
with regard to secured assets.

Considering the aforesaid, we are not
inclined to allow the applicants to be
impleaded in the present proceedings as
the applicants have a remedy to approach
the Debt Recovery Tribunal, under
Section 17 (4) of the Act, therefore, the
impleadment application is rejected. "

7. The petitioners are thereafter
stated to have approached the D.R.T. by
filing Securitization Application No. 50 of
2019. It appears that at the relevant time,
the Tribunal was not functioning at
Allahabad constraining the petitioners to
approach this Court by way of Writ -C
No. 4540 of 2019 That petition was
disposed of on 8 February 2019 upon the
Division Bench being informed that the
vacancy in the office of the Presiding
Officer as existing had since been filled
and therefore it would be open to the
petitioners here to move an urgency
application before the Tribunal for grant
of appropriate relief. The Court further
provided that till 11 February 2019, no
coercive action would be taken against the
petitioners.
The
Securitization
Application was ultimately dismissed by
the D.R.T. in terms of its order dated 21
February 2019. While dismissing that
application the Tribunal noted that the
Rent
Agreement
in
question
was
unregistered and that it was in violation of
Section 65A(2)(c) of the 1882 Act. From
a reading of that order it appears that
Clause 7 of the Rent Agreement,
extracted hereinabove, was construed to
be a provision for renewal and therefore
in violation of the injunct engrafted in
Clause (c) of Section 65A(2).

8. It would also be relevant to note
that in the interregnum the petitioners also
appear to have moved an application
before the District Judge, Kanpur Nagar
referable to Section 9 of the Arbitration
and Conciliation Act, 1996 seeking an
interim restraint against the original
borrowers from interfering in the business
being carried on by them from the secured
asset. The District Judge passed an order
of 26 February 2019 restraining the
original borrowers from interfering with
the possession of the petitioners and for
maintenance of status quo. It is significant
to note at this juncture that a similar
application under Section 9 of the 1996
Act was previously filed before the
District
Judge,
Kanpur
Dehat.
The
original borrowers who appeared in those
proceedings are stated to have conceded
to the grant of interim protection to the
petitioners here. Notwithstanding the
1 All. AGME Marketing Pvt. Ltd. & Ors. Vs. Canara Bank & Ors.
1107
consent between parties, the District
Judge,
Kanpur
Dehat,
rejected
the
application on 30 May 2018 holding that
since
the
Rent
Agreement
was
unregistered, no relief could be granted to
the petitioners. This order, it becomes
pertinent to note, does not appear to have
been brought to the attention of the
District Judge, Kanpur Nagar who granted
interim protection to the petitioners on 26
February 2019. Significantly, the order of
the District Judge, Kanpur Dehat referred
to above was also not disclosed in the writ
petition. It has come on the record of
these proceedings along with the Counter
Affidavit which has been filed by the
Bank. It is in that backdrop that Sri
Srivastava, learned counsel has contended
that
the
petitioners
are
guilty
of
suppression of material facts and that the
instant writ petition thus must be
dismissed on this ground alone. However,
the Court shall deal with this submission
at
an
appropriate
juncture
in
this
judgment.

9.

Since
the
Securitization
Application had come to be rejected by
the D.R.T. on 21 February 2019, the
petitioners preferred
a Securitization
Appeal before the D.R.A.T. on 8 March
2019. That appeal has been dismissed by
the D.R.A.T. On 03 May 2019. The
D.R.A.T while rejecting the Securitization
Appeal has affirmed the view taken by the
D.R.T. holding that Clause 7 of the Rent
Agreement violated the provisions of
Section 65A(2)(c). Additionally, it has
held that since the period of three years
when computed from the date of
execution
of
the
lease
deed
had
admittedly expired on 3 April 2015, the
petitioners had lost their right to be
treated as statutory tenants. Clause 7, the
D.R.A.T noted, was a continuance clause
clearly in violation of Clause (c) of
Section 65A(2).

10. Aggrieved by those orders, the
instant writ petition came to be preferred
before this Court on 14 May 2019. On 24
May 2019, a learned Judge of the Court
after hearing submissions addressed on
behalf of the respective parties, directed
them to exchange affidavits and in the
meanwhile provided that status quo would
be maintained. That order of status quo
has been extended on this petition from
time to time.

11. Before this Court, the principal
submission which has been addressed by
Sri Rakesh Pande, the learned Senior
Counsel appearing on behalf of the
petitioners, was that the Rent Agreement
was for a fixed tenure of three years and
upon the expiry of that term the
petitioners are liable to be treated as
tenants holding over. Sri Pande contends
that since the tenancy so existing has not
been terminated in accordance with the
provisions made in Section 106 of the
1882 Act, the petitioners are not liable to
be evicted from the premises in question.
According to Sri Pande, a tenant holding
over is entitled to enjoy the demised
premises by virtue of the provisions made
in Section 116 of the 1882 Act and after
the expiry of the term of three years, the
lease executed in favour of the petitioners
would be liable to be viewed as
continuing from month to month till it is
determined in accordance with Section
106. Sri Pande has submitted that both the
D.R.T. as well as the D.R.A.T have
clearly misconstrued Clause 7 of the Rent
Agreement
and
have
consequently
committed a manifest illegality in holding
it to be in violation of Section 65A(2)(c).
According to Sri Pande, on a plain
1108 INDIAN LAW REPORTS ALLAHABAD SERIES
reading of that clause, it is manifest that it
confers no right of renewal. Sri Pande has
further submitted that the proceedings as
initiated by the Bank are liable to be
quashed on account of a failure to comply
with the provisions made in Section 14 of
the 2002 Act. This submission is
addressed since according to Sri Pande,
the application made by the Bank was not
supported by an affidavit as mandatorily
required. It is his further submission that
the application must also be quashed since
the Bank did not advertise the steps
initiated by it in newspapers having wide
circulation. Sri Pande submits that these
objections taken to the proceedings
initiated by the Bank though specifically
urged by the petitioners have neither been
dealt with nor considered by either the
D.R.T. or D.R.A.T. Sri Pande in support
of his submissions has placed reliance
upon the decisions rendered by the
Supreme Court in Harshad Goverdhan
Sondagar
v.
International
Assets
Reconstruction Company Limited And
Others8 and Vishal N. Kalsaria v Bank of
India9 to contend that the rights of a
tenant do not stand effaced or overridden
by the provisions of the 2002 Act.
According to Sri Pande since the
petitioners were tenants holding over
whose lease had not been terminated in
accordance with the provisions made in
Section 106 of the 1882 Act, the Bank
could not be permitted to take over
possession of the secured asset. While Sri
Pande submitted that in case the Court
were to agree with the contention of the
petitioners that clause 7 is not a provision
for renewal, the matter be remitted back
to the DRT, he was invited to establish
that the Rent Agreement otherwise
satisfied the requirements of Section 65-A
(2)
of
the
1882
Act.
Addressing
submissions in that light and proceeding
further, Sri Pande submitted that the
Court must assume the lease to be of a
monthly tenure. According to Sri Pande
clause 7 of the Rent Agreement while not
entitled to be viewed or accepted as
evidence of a clause of renewal or
continuance, it can be considered to
adjudge the character of the possession of
the petitioner. Dealing with clause (e), Sri
Pande referred the Court to Clause 7 of
the Rent Agreement and the provisions of
termination made thereunder.

12. Countering these submissions,
Sri Srivastava, learned counsel appearing
for the Bank, has firstly contended that
the petitioners are guilty of suppression of
material facts and therefore are clearly
disentitled from the grant of any relief by
this Court while exercising its jurisdiction
under Article 226 of the Constitution. It
was contended that there was a deliberate
concealment of facts by the petitioners
who failed to disclose before the District
Judge, Kanpur Nagar that their earlier
application under Section 9 had already
been dismissed. Sri Srivastava argued that
the deliberate suppression of facts was
continued when the order of the District
Judge, Kanpur Dehat dated 30 May 2018
was not even disclosed in the writ
petition.
Elaborating
further,
Sri
Srivastava submitted that the original
borrowers never disclosed to the Bank the
creation of the alleged tenancy in favour
of the petitioners. He highlighted the facts
that the original borrowers in their
application filed under Section 17 of the
2002
Act
nowhere
mentioned
nor
disclosed the factum of the tenancy
created in favour of the petitioners. It was
further highlighted that even in O.A. No.
32 of 2013 in which the original
borrowers appeared and filed their written
statement on 18 November 2013, no
1 All. AGME Marketing Pvt. Ltd. & Ors. Vs. Canara Bank & Ors.
1109
disclosure was made with respect to the
creation of the tenancy in question. Sri
Srivastava has vehemently contended that
the creation of the tenancy is clearly a
sham designed to defeat the lawful claim
of the Bank. According to him the Rent
Agreement has been antedated only to
thwart the rights of the Bank to take
possession of the secured asset. Sri
Srivastava has also highlighted the fact
that the petitioners are stated to have
entered into business transactions with
companies that were managed by the
family members of the Directors of the
original borrowers. What was essentially
sought to be conveyed was that the
petitioners here were merely a front of the
original borrowers set up to defeat the
claims of the Bank.

13. Addressing the Court on the
merits of the questions raised, Sri
Srivastava contended that the claim of the
petitioners is liable to be negatived since
evidently
the
terms
of
the
Rent
Agreement are in manifest violation of
Section 65(2)(e) of the 1882 Act. Sri
Srivastava contends that since Clause 7
created a right in favour of the petitioners
to enjoy the secured asset in perpetuity, it
must be held to be a lease exceeding a
period of three years and thus being in
clear violation of Clause (e). It was
further submitted that the Rent Agreement
would fall foul of Clause (e) also because
it did not contain any clause of re-entry.
Countering the submissions addressed by
Sri Pande that the provisions of Section
14 were violated, Sri Srivastava has
placed on the record an authenticated
copy of the Affidavit filed by the Bank in
Writ Petition No. 38518 of 2018 to
establish that the application under
Section 14 as moved by the Bank was, in
fact, duly supported by an affidavit. Sri
Srivastava has also drawn the attention of
the Court to the advertisements taken out
in various leading newspapers to submit
that the Bank had scrupulously adhered to
the requirements as placed by the 2002
Act. Sri Srivastava submits that since the
Rent
Agreement
in
question
was
admittedly an unregistered agreement, it
was clearly in violation of the mandatory
requirements put in place by Section 107
of the 1882 Act and that consequently the
petitioners were not entitled to the grant
of any protection in law. Sri Arvind
Srivastava has pressed in aid a decision
rendered by a Division Bench of the
Kerala High Court in P.M. Kelukutti
And Others v. Young Men's Christian
Association And Others to submit that
since the lease in question was clearly
violative of the provisions made in
Section 65-A (2)(e), no protection could
be accorded to the petitioners here from
the action initiated by the Bank under the
2002 Act.

14. Sri Kartikeya Saran, learned
counsel
appearing
for
the
auction
purchaser, has submitted that the Rent
Agreement which was unregistered was
clearly hit by Section 49 of the
Registration Act, 1908 and consequently
no rights could be recognized as having
been created in favour of the petitioners.
Sri Saran has also drawn the attention of
the Court to the fact that although four
plots were auctioned by the Bank, the
dispute in the present case relates to Plot
No. 461 only and that the auction
purchaser
who
has
paid
valuable
consideration
is
being
unjustifiably
deprived of possession. Sri Saran has
submitted that the auction proceedings
were
duly
advertised
and
notices
published in reputed newspapers. Sri
Saran contends that both the D.R.T. as
1110 INDIAN LAW REPORTS ALLAHABAD SERIES
well as the D.R.A.T. have rightly held
that the Rent Agreement in question was
violative of the provisions of Section 65
A and therefore the petitioners would
clearly not be entitled to any relief. Sri
Saran while reiterating the contentions
addressed on behalf of the Bank that the
lease was in clear violation of the
provisions of Section 65-A drew the
attention of the Court to a decision
rendered by a Division Bench of the Delhi
High Court in Sanjeev Bansal v. Oman
International Bank SAOG And Others
to submit that the petitioners had no right
to assail the action initiated by the Bank
or to challenge the auction conducted
under the provisions of the 2002 Act.

15. The Court before proceeding to
deal with the fundamental questions
raised deems it appropriate to dispose of
two preliminary issues at this juncture.
Although it has been strenuously urged
[and which allegation cannot perhaps be
lightly brushed aside] that the petitioners
suppressed and concealed material facts,
the Court does not deem it expedient to
non-suit the petitioners on this charge for
the following reasons. Firstly this writ
petition was entertained by a learned
Judge of the Court and set down for
admission after hearing counsels for
respective
parties.
The
issue
of
concealment and suppression which may
have had some relevance on the question
of this Court entertaining the writ petition
does not appear to have been raised.
Moreover parties have been heard at
length by the Court and have made
elaborate submissions on the merits of the
matter.
It
would
therefore
be
in
furtherance of the ends of justice to lend a
quietus to the controversy raised more so
since this Court cannot be unmindful of
the fact that the right of a financial
institution seeking to recover public
moneys is at stake. There is thus an
evident
expediency
to
render
an
authoritative
pronouncement
on
the
questions that have been raised and ring
the curtains down on this litigation.

16. Insofar as the issue of the
application of the Bank not being in
accordance with the requirements of
statute, suffice it to note that a copy of the
counter affidavit filed by the Bank in the
earlier round of litigation clearly puts the
controversy to rest. Insofar as the issue of
advertisement
of
proceedings
is
concerned, the same have also been
brought on record. Sri Pande has failed to
establish or prove that the newspapers in
which
these
advertisements
were
published were not of wide circulation.
More fundamentally he has also failed to
prove
that
the
petitioners
had
no
knowledge of the proceedings initiated by
the Bank.

17. That then takes the Court to
consider the correctness of the findings
returned by both the DRT and DRAT that
clause 7 was a renewal clause which
violated the provisions of clause (c) of
Section 65A(2). In the considered view of
this Court, the contention of Sri Pande on
this facet of the controversy appears to be
correct. On a plain reading of clause 7, it
is evident that the lessee was conferred a
right to continue in possession of the
demised premises till the cancellation of
the Rent Agreement itself or till the lessor
paid
costs
and
expenses
of
the
constructions/renovation
of
the
constructions raised thereon. Viewed in
the backdrop of the plain language
employed in that provision, it is evident
that clause 7 was really not a clause
envisaging renewal. The Black's Laws
1 All. AGME Marketing Pvt. Ltd. & Ors. Vs. Canara Bank & Ors.
1111
Dictionary (Ninth Edition) defines the
expression "renewal" in the following
terms:

"renewal, n (17c). 1. The act of
restoring
or
reestablishing.
2.
parliamentary law. The introduction or
consideration of a question already
disposed of.-Also termed renewal of a
motion. See restorative motion under
MOTION(2), Cf. RECONSIDER. 3.The
re-creation of a legal relationship or the
replacement of an old contract with a new
contract, as opposed to the mere tension
of a previous relationship or contract. Cf.
EXTENSION(1); REVIVAL(1)."

P Ramanatha Aiyer's in the Law
Lexicon has defined the word "renew"
and "renewal" as under: -

"Renew. "To renew", in its popular
sense, is to refresh, revive, or rehabilitate
an expiring or declining subject.

To continue in force for a fresh
period; to make new.

The word "renewed", or "renewal" as
applied
to
promissory
notes
in
commercial and legal parlance, means
something more than the substitution of
another obligation for the old one. It
means to re-establish a particular contract
for another period of time, to restore to its
former conditions an obligation on which
the time of payment has been extended.

"Renew in relation to grant of lease
is, to grant a new or to grant or give a
lease for a fresh period" R.M. Mehta V.
H.P.F.M.Co.
Ltd.,
AIR
1976
Mad
194.203.

Generally a bill or note "is renewed
by another being taken in its place, the
parties and the amount being the same,
though perhaps in some cases the interest
due on the first is added" (per LINDLEY,
L.J. Barber v. Mackrell, 68 LT 29: 41 WR

To "renew" a bill or note, does not,
always not necessarily, import that a new
or additional bill or notice is to be given;
such an instrument is "renewed" merely
by the time for its payment being
extended (Russell v. Philips, 19 LJQB
297: 12 QB 892).

Renewal. A change of something old
for something new. An act of renewing
any permission, grant, etc. [S. 71, T.P.
Act (4 of 1882)]

"The renewal of a "license" means, a
new license granted by way of renewal".
(Paterson's
Licensing
Acts:
7
Encyc.400,401).

The renewal of negotiable bill or
note is regarded simply as a prolongation
of the original contract.

The office of a "renewal", as it is
termed, of a life, policy, is to prevent
discontinuance or forfeiture."

18. Explaining the ambit of that
expression, the Supreme Court in Gajraj
Singh Vs. State Transport Appellate
Tribunal held thus

35.This may be angulated from yet
another
legal
perspective,
namely,
consequences that would flow from the
meaning of the word `renewal' of a permit
under Section 81 of the Act. Black`s Law
Dictionary Sixth Edn., defines the word
`renewal' at p. 1296 thus:

"The act of renewing or reviving. A
revival or rehabilitation of an expiring
subject; that which is made anew or reestablished. The substitution of a new
right or obligation for another of the same
nature. A change of something old to
something new. To grant or obtain
extension of;"

36. In P. Ramanatha Aivar's "The
law Lexicon" (Reprint Edn. 1987), the
1112 INDIAN LAW REPORTS ALLAHABAD SERIES
word `renewal' is defined at p. 1107 to
mean "a change of something old for
something new". The renewal of a
`licence' means "a new licence granted by
way of renewal". The renewal of a
negotiable bill or note is regarded simply
as a prolongation of the original contact.
The office of a 'renewal', as it is termed,
of
a
life
policy,
is
to
prevent
discontinuance of forfeiture.

37. In Provash Chandra Dalui v.
Biswanath Banerjee [1989 Supp (1) SCC
487] (SCC at p. 496] in para 14, this
Court drew the distinction between the
meaning of the words extension and
renewal. It was held that:

"... a distinction between 'extension'
and 'renewal' is chiefly that in the case of
renewal, a new lease is required while in
the case of extension the same lease
continues in force during additional
period by the performance of stipulated
act. In other words, the word `extension'
when used in its proper and usual sense in
connection
with
a
lease,
means
prolongation of the lease."

19. As is evident from the dictionary
meaning ascribed to the word "renewal",
it is principally an act of restoration or reestablishment. It has been defined to
mean the recreation of a legal relationship
and the replacement of an old contract
with a new as opposed to a mere
extension of a previous relationship or
contract. Similarly it has been defined to
mean to restore or to grant a new or fresh
lease. It has also been defined to mean
and
convey
a
prevention
of
discontinuance or forfeiture. From the
nature of the language which is employed
in clause 7, it is manifest that it conferred
a right on the petitioners to continue to
occupy the secured asset even after the
expiry of the original period of three years
and to continue as such till the agreement
was ultimately cancelled or till they were
paid the costs of construction/renovation.
In one sense the provision clearly appears
to confer a right on the petitioners to
occupy the premises in perpetuity or at
least till the agreement was cancelled or
costs of construction reimbursed to the
petitioners. It, in any case, did not
envisage
a
periodical
extension
or
restoration of the original term of the
lease. In the considered view of this
Court, both the DRT as well DRAT have
clearly erred, therefore, in construing
clause 7 to be a provision for renewal.
The conclusion so drawn by these
authorities of the Rent Agreement being
in violation of clause (c) of Section
65A(2) consequently does not merit
acceptance.

20. The core issue which falls for
consideration
is
whether
the
Rent
Agreement of 04 April 2012 stands saved
under the provisions of Section 65-A.
Section 65-A reads thus: -

"[65-A.
Mortgagor's
power
to
lease.-

(1) Subject to the provisions of subsection (2), a mortgagor, while lawfully in
possession of the mortgaged property,
shall have power to make leases thereof
which shall be binding on the mortgagee.

(2) (a) Every such lease shall be such
as would be made in the ordinary course
of management of the property concerned,
and in accordance with any local law,
custom or usage,

(b) Every such lease shall reserve the
best rent that can reasonably be obtained,
and no premium shall be paid or promised
and no rent shall be payable in advance,

(c) No such lease shall contain a
covenant for renewal,
1 All. AGME Marketing Pvt. Ltd. & Ors. Vs. Canara Bank & Ors.
1113

(d) Every such lease shall take effect
from a date not later than six months from
the date on which it is made,

(e) In the case of a lease of buildings,
whether leased with or without the land
on which they stand, the duration of the
lease shall in no case exceed three years,
and the lease shall contain a covenant for
payment of the rent and a condition of reentry on the rent not being paid within a
time therein specified.

(3) The provisions of sub-section (1)
apply only if and as far as a contrary
intention
is
not
expressed
in
the
mortgage-deed; and the provisions of subsection (2) may be varied or extended by
the mortgage-deed and, as so varied and
extended, shall, as far as may be, operate
in like manner and with all like incidents,
effects and consequences, as if such
variations or extensions were contained in
that sub-section.]"

21. Explaining the interplay and
impact of the provisions of the 2002 Act
on the rights of a tenant as preserved and
protected by the 1882 Act, the Supreme
Court in Harshad Govardhan Sondagar
Vs. International Assets Reconstruction
Company
Limited
and
others
expounded the legal position in the
following terms: -

21. When we read the different
provisions
of
Section
13
of
the
SARFAESI Act extracted above, we find
that Sub-section (4) of Section 13
provides that in case the borrower fails to
discharge his liability in full within sixty
days from the date of notice as provided
in subsection (2) of Section 13 of the
SARFAESI Act, the secured creditor may
take recourse to one or more of the
measures mentioned therein to recover his
secured debt. One of the measures
mentioned in clause (a) in Sub-section (4)
of Section 13 of the SARFAESI Act is to
take possession of the secured assets of
the borrower including the right to
transfer by way of lease. Where, however,
the lawful possession of the secured asset
is not with the borrower, but with the
lessee under a valid lease, the secured
creditor cannot take over possession of
the secured asset until the lawful
possession of the lessee gets determined.
There is, however, no mention in Subsection (4) of Section 13 of the
SARFAESI Act that a lease made by the
borrower in favour of a lessee will stand
determined on the secured creditor
deciding to take any of the measures
mentioned in Section 13 of the said Act.
Subsection (13) of Section 13 of the
SARFAESI Act, however, provides that
after receipt of notice referred to in subsection (2) of Section 13 of the
SARFAESI Act, no borrower shall lease
any of his secured assets referred to in the
notice, without the prior written consent
of the secured creditor. This provision in
sub-section (13) of Section 13 of the
SARFAESI Act and the provisions of the
Transfer of Property Act enabling the
borrower or the mortgagor to make a
lease are inconsistent with each other.
Hence, sub-section (13) of Section 13 of
the SARFAESI Act will override the
provisions of Section 65-A of the Transfer
of Property Act by virtue of Section 35 of
the SARFAESI Act, and a lease of a
secured asset made by the borrower after
he receives the notice under sub-section
(2) of Section 13 from the secured
creditor intending to enforce that secured
asset will not be a valid lease.
 .....

Section 105 thus provides that a
lessee of an immovable property has a
right to enjoy such property, for a certain
1114 INDIAN LAW REPORTS ALLAHABAD SERIES
time or in perpetuity when a lessor leases
an immovable property transferring his
right to enjoy such property for a certain
time or in perpetuity. Section 111 of the
Transfer of Property Act, 1882 provides
the different modes by which a lease gets
determined. Thus, so long as a lease of an
immovable
property
does
not
get
determined, the lessee has a right to enjoy
the property and this right is a right to
property and this right cannot be taken
away without the authority of law as
provided
in
Article
300-A
of
the
Constitution. As we have noticed, there is
no provision in Section 13 of the
SARFAESI Act that a lease in respect of a
secured asset shall stand determined when
the secured creditor decides to take the
measures mentioned in Section 13 of the
said Act. Without the determination of a
valid lease, the possession of the lessee is
lawful and such lawful possession of a
lessee has to be protected by all courts
and tribunals.

........

25. The opening words of subsection (1) of Section 14 of the
SARFAESI Act make it clear that where
the possession of any secured assets is
required to be taken by the secured
creditor or 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, for the
purpose of taking possession or control of
any such secured asset, request, in
writing,
the
Chief
Metropolitan
Magistrate or the District Magistrate
within whose jurisdiction any such
secured asset or other documents relating
thereto may be situated or found, to take
possession
thereof.
Thus,
only
if
possession of the secured asset is required
to be taken under the provisions of the
SARFAESI Act, the secured creditor can
move the Chief Metropolitan Magistrate
or the District Magistrate for assistance to
take possession of the secured asset. We
have already held that Section 13 of the
SARFAESI Act does not provide that the
lease in respect of a secured asset will get
determined when the secured creditor
decides to take the measures in the said
section.