# M/s Trilok Chand Fabrication v. State of U.P. & Ors

- **Citation:** (2024) 1 ILRA 823
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-01-11
- **Case number:** Writ-C No. 39914 of 2023
- **Bench:** Siddhartha Varma, Shekhar B. Saraf
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-trilok-chand-fabrication-v-state-of-u-p-ors-51385
- **Pages:** 28

## Headnote

Law
-
Securitization
and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act,
2002 - Sections 14 & 34 - Code of Civil
Procedure, 1908 - Section 9 - Respondent
Nos. 5 to 7 obtained loan from Respondent No.
4 by mortgaging their immovable property -
Upon default, loan classified as NPA, mortgaged
property auctioned - Respondent No. 4 moved
application before Respondent No. 2 for
possession - During pendency, property sold to
petitioner through auction- Respondent No. 8
instituted Civil Suit seeking injunction against
eviction, claiming tenancy under Respondent
No. 5 on basis of 12-year lease - Temporary
injunction granted in favour of Respondent No.
8 - Section 14 proceedings transferred to
Respondent No. 3, who, considering civil court's
injunction, kept application under abeyance till
disposal of suit - Petitioner challenged impugned
order by contending tenancy without registered
lease cannot exceed 11 months and Respondent
No. 3 erred in keeping Section 14 proceedings in
abeyance instead of deciding tenancy validity -
Under Section 107, TPA and Section 17 and 49,
Registration Act, lease of immovable property
exceeding one year can be created by registered
instrument; oral agreements or unregistered
leases are unenforceable - Month-to-month
tenancy cannot confer right to retain possession
of secured asset in proceedings u/s 14
SARFAESI Act - To claim possession, tenant
must hold registered lease - Upon initiation of
Section 14 proceedings, tenant may either
approach
authorised
officer/DM/CMM
or
824 INDIAN LAW REPORTS ALLAHABAD SERIES
surrender possession - Where tenant resists,
authorised officer shall move DM/CMM and
DM/CMM shall adjudicate tenancy rights - If
valid lease exists, possession will not be handed
over to creditor - If tenant approach DRT, u/s 17
SARFAESI Act, DRT restore possession only to
borrower, not to tenant - Directions accordingly.
(Para 2, 6, 40)

Writ petition allowed. (E-13)

List of Cases cited:

## Text

_Characters 0–39,895 of 96,795. This is a partial read: ask again with offset=39895 for what follows._

1 All. M/s Trilok Chand Fabrication Vs. State of U.P. & Ors.
823

28. Thus we recognise, standardised
formula exist under two other enactments,
to provide for compensation for tortious
liability. First, under the Motor Vehicle Act,
1988 a schedule exists with respect to
which law is fairly well settled in view of
Sarla Verma & Ors. v. Delhi Tranpsort
Corporation & Anr. (2009) 6 SCC 121
and
National
Insurance
Company
Limited. vs. Pranay Sethi and others
(2017) 16 SCC 680. Also, another
structured
formula
exists
under
the
Employees Compensation Act, 1923. If the
schedule under the Motor Vehicle Act,
1988 were to be considered/applied to such
facts, compensation not less than 53 Lakhs
(plus interest) would be payable. In
contrast,
under
the
Employees
Compensation Act, that amount may be
computed around Rs. 34 Lakhs (plus
interest). These estimates have been made
on the undisputed facts that the deceased
was about 52 years of age on the date of his
death. He was gainfully employed as a
Government servant earning about INR
46,100/- per month by way of salary and
had four dependents being three children
and a wife.

29.

Accordingly,
we
award
compensation- Rs. 50 Lakh to be paid to
the petitioner by respondent no.1 within a
period of three months from today together
with interest on that amount @ 6 % per
annum from the date of occurrence till the
date of actual payment.

30. The petition is accordingly
allowed. No order as to costs.
----------
(2024) 1 ILRA 823
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.01.2024

BEFORE
THE HON'BLE SIDDHARTHA VARMA, J.
THE HON'BLE SHEKHAR B. SARAF, J.

Writ-C No. 39914 of 2023

M/s Trilok Chand Fabrication ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Rahul Sripat (Sr. Advocate), Sri Ishir Sripat,
Sri Saurabh Patel

Counsel for the Respondents:
Addl. C.S.C., Sri Sanjai Singh, Sri Udayan
Nandan, Sri Shashi Nandan (Sr. Advocate)

Civil
Law
-
Securitization
and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act,
2002 - Sections 14 & 34 - Code of Civil
Procedure, 1908 - Section 9 - Respondent
Nos. 5 to 7 obtained loan from Respondent No.
4 by mortgaging their immovable property -
Upon default, loan classified as NPA, mortgaged
property auctioned - Respondent No. 4 moved
application before Respondent No. 2 for
possession - During pendency, property sold to
petitioner through auction- Respondent No. 8
instituted Civil Suit seeking injunction against
eviction, claiming tenancy under Respondent
No. 5 on basis of 12-year lease - Temporary
injunction granted in favour of Respondent No.
8 - Section 14 proceedings transferred to
Respondent No. 3, who, considering civil court's
injunction, kept application under abeyance till
disposal of suit - Petitioner challenged impugned
order by contending tenancy without registered
lease cannot exceed 11 months and Respondent
No. 3 erred in keeping Section 14 proceedings in
abeyance instead of deciding tenancy validity -
Under Section 107, TPA and Section 17 and 49,
Registration Act, lease of immovable property
exceeding one year can be created by registered
instrument; oral agreements or unregistered
leases are unenforceable - Month-to-month
tenancy cannot confer right to retain possession
of secured asset in proceedings u/s 14
SARFAESI Act - To claim possession, tenant
must hold registered lease - Upon initiation of
Section 14 proceedings, tenant may either
approach
authorised
officer/DM/CMM
or
824 INDIAN LAW REPORTS ALLAHABAD SERIES
surrender possession - Where tenant resists,
authorised officer shall move DM/CMM and
DM/CMM shall adjudicate tenancy rights - If
valid lease exists, possession will not be handed
over to creditor - If tenant approach DRT, u/s 17
SARFAESI Act, DRT restore possession only to
borrower, not to tenant - Directions accordingly.
(Para 2, 6, 40)

Writ petition allowed. (E-13)

List of Cases cited:

1. Harshad Govardhan Sondagar Vs International
Assets Reconstruction Company Ltd. & ors. (2014)
6 SCC 1, (Paras 26, 27, 28, 32, 36)

2. Bajrang Shyamsundar Agarwal Vs Central Bank
of India & ors. (2019) 9 SCC 94, (Paras 17, 18, 23,
24) (Relied)

3. Hemraj Ratnakar Salian Vs HDFC Bank Ltd., AIR
2021 SC 3880, (Para 12) (Relied)

4. Agme Marketing Pvt. Ltd.Vs Canara Bank & ors.
2019 (8) ADJ 272, (Para 30) (Relied)

5. ICICI Bank Ltd. & ors. Vs Umakanta Mohapatra
& ors. (2019) 13 SCC 497, (Para 2)

6. Authorized Officer, St. Bank of Travancore & anr.
Vs Mathew K.C., (2018) 3 SCC 85, (Paras 5, 10)

7. Intazar Ali Vs St. of U.P. & ors. Writ-C No. 12664
of 2019, dated April 24, 2019 (Followed)

8. Shri Janki Devi Bhagat Trust, Agra Vs Ram
Swarup Jain (Dead) by Lrs., (1995) 5 SCC 314,
(Para 4)

9. Kiran Dhawan Vs Vivek Mittal & anr., 2018 SCC
OnLine All 25

10. Samir Mukherjee Vs Davinder Kumar Bajaj,
(2001) 5 SCC 259, (Paras 8 to 10)

11. Mardia Chemicals Ltd. & ors. Vs U.O.I. &
ors. (2004) 4 SCC 311, (Paras 50, 51)

12. Punjab and Sind Bank Vs Frontline
Corporation Ltd., 2023 SCC OnLine SC 470,
(Paras 23, 24)
13. SREE Anandhakumar Mills Ltd.Vs Indian
Overseas Bank & ors. MANU/SCOR/15183/2018

14. Whirlpool Corporation Vs Registrar of Trade
Marks, Mumbai & ors. (1998) 8 SCC 1, (Paras 14
to 16)

15. Central Council for Research in Ayurvedic
Sciences & anr. Vs Bikartan Das & ors. 2023 SCC
OnLine SC 996, (Para 65)

16. Nagendra Nath Bora & anr. Vs The
Commissioner of Hills Division and Appeal,
Assam & ors. 1958 SCC OnLine SC 45, (Para 36)

(Delivered by Hon'ble Siddhartha Varma,
J. & Hon'ble Shekhar B. Saraf, J.)

1. The instant writ petition has been
filed by the petitioner, M/s Trilokchand
Fabrication Pvt. Ltd. praying for the
issuance of a writ of certiorari quashing the
order dated April 18, 2023 (hereinafter
referred to as the 'impugned order') passed
by The Additional District Magistrate,
Finance
and
Revenue,
Bulandshahr
(hereinafter referred to as the 'Respondent
No. 3') and/or a writ of or in the nature of
Mandamus directing the Respondent No. 3
to allow the application filed under Section
14 of the Securitization and Reconstruction
of Financial Assets and Enforcement of
Security Interest Act, 2002 (hereinafter
referred to as the 'SARFAESI Act') without
being affected by the temporary injunction
order dated November 9, 2021 (hereinafter
referred to as the 'injunction order').

Facts

2. Factual matrix of the instant case is
delineated down below:

a. M/s JN Robotics Automation Pvt.
Ltd.
(hereinafter
referred
to
as
the
'Respondent No. 5'), Shri Navneet Sharma,
Director, Respondent No. 5 (hereinafter
1 All. M/s Trilok Chand Fabrication Vs. State of U.P. & Ors.
825
referred to as the 'Respondent No. 6') and,
Shri Jyoti Sharma, Director, Respondent
No. 5 (hereinafter referred to as the
'Respondent No. 7') had taken a loan from
the Punjab National Bank, Circle Shastra
Centre, Ghaziabad (hereinafter referred to
as the 'Respondent No. 4'). As a security
for the said loan, they had mortgaged their
immovable property being plot nos. N1 and
N2, Industrial Area, Sikandrabad, District
Bulandshahr admeasuring total area 2000
square meters (hereinafter referred to as the
'immovable property').

b. Respondents No. 5, 6, and 7
defaulted on the loan and after the
classification of the loan as a 'NonPerforming Asset' under the provisions of
the
SARFAESI Act,
the
immovable
property belonging to the Respondents No.
5, 6, and 7 was auctioned.

c. Respondent No. 4 preferred an
application under Section 14 of the
SARFAESI
Act
before
the
District
Magistrate,
Bulandshahr
(hereinafter
referred to as the 'Respondent No. 2') for
taking
possession
of
the
immovable
property. During the pendency of the
proceedings under Section 14 of the
SARFAESI Act, the Respondent No. 4 sold
the property to the petitioner vide an
auction on December 14, 2022.

d.
During
the
pendency
of
the
proceedings under Section 14 of the
SARFAESI Act, a Civil Suit for Injunction,
being Original Suit No. 198 of 2021 was
preferred by one Sanjiv Kumar (hereinafter
referred to as the 'Respondent No. 8') against
the Respondent No. 5 praying for a decree of
injunction against evicting him without
following the due process of law on the
ground that the Respondent No. 8 is the
tenant of the Respondent No. 5 and has duly
entered into a lease for a period of 12 years.

e. Vide order dated November 11,
2021, the Court of Civil Judge, Senior
Division, Bulandshahar granted temporary
injunction to the Respondent No. 8 over the
immovable
property
against
the
Respondent No. 5.

f. Application under Section 14 of the
SARFAESI Act was later transferred to the
Respondent No. 3. Respondent No. 3,
keeping in mind, the injunction order passed
by the civil court, vide its order dated April
18, 2023, directed the application filed under
Section 14 of the SARFAESI Act to be kept
under abeyance till the disposal of Original
Suit No. 198 of 2021. The instant writ
petition has been preferred against the said
order dated April 18, 2023.

Contentions by the Petitioner

3. Shri Rahul Sripat, learned Senior
Advocate, has advanced the following
arguments on the behalf of the petitioner:

a. The immovable property was
leased
by
the
U.P.
State
Industrial
Development Corporation Ltd. (hereinafter
referred to as 'UPSIDC') and hence as per
the lease deed dated November 15, 2017,
the same could not have been sub-let by the
borrower.

b. There is no registered lease
deed for the immovable property. Hence no
lease beyond a period of 11 months is
permissible without there being a registered
lease deed in as much as the lease of the
Respondent No. 5 from the UPSIDCS also
prohibits sub-letting of the plot.

c. Order dated April 18, 2023, is
patently illegal to the extent that neither the
Petitioner nor the Respondent No. 4 is a
party to the Original Suit No. 198 of 2021
and hence the said temporary injunction
has no binding effect and only the
Respondent No. 5 was injuncted in
interfering with the possession of the
Respondent No. 8.
826 INDIAN LAW REPORTS ALLAHABAD SERIES

d. Order dated April 18, 2023,
besides being illegal, unjust and arbitrary is
also hit by Articles 14, 21, and 300A of the
Constitution of India. The said order is in
teeth of the settled propositions of law in as
much as the Respondent No. 3 ought to
have called upon the Respondent No. 8 to
submit his lease deed whereafter the
Respondent No. 3 based on the provisions
of law ought to have passed its order on
merits. Reliance was placed on the
judgment of the Hon'ble Supreme Court of
India in Harshad Govardhan Sondagar -v-
International
Assets
Reconstruction
Company Ltd. and Ors, (2014) 6 SCC 1.

e. From the aforesaid judgement
it is abundantly clear that such injunction
orders obtained by illegal occupants
referring themselves as the tenants cannot
be any reason for keeping the proceedings
under Section 14 of the SARFAESI Act
under abeyance in as the same will very
conveniently
frustrate
the
aims
and
objectives of the SARFAESI Act.

f.
Petitioner
has
also
filed
application in Original Suit No. 198 of
2021 to apprise the learned court below of
the
correct
facts
and
circumstances.
However, filing of the said application does
not create an estoppel against the Petitioner
from challenging the impugned order and
getting its rights executed under the law.

g. Petitioner is a bonafide auction
purchaser who has invested huge amounts
of money and is unable to enjoy the fruits
of his purchase due as a result of the
impugned order. Although the impugned
order has been passed upon the application
of the Respondent No. 4 but it is only the
Petitioner who is the affected party.
Therefore, the petitioner has the locus
standi to challenge the impugned order.

h.
Under
the
facts
and
circumstances of the instant case it is
expedient in the interest of justice that this
Court stays the effect and operation of the
impugned order during the pendency of the
instant writ petition before this Court. The
impugned order is not a final order under
Section 14 of the SARFAESI Act and
hence the Petitioner has no other alternative
efficacious remedy other than to approach
this Court under Article 226 of the
Constitution of India.

i. To support the petitioner's case,
judgments of the Hon'ble Supreme Court
of India in Bajrang Shyamsundar Agarwal
-v- Central Bank of India and Ors. ,
(2019) 9 SCC 94 , Hemraj Ratnakar
Salian -v- HDFC Bank Ltd. , AIR 2021
SC 3880, Agme Marketing Pvt. Ltd. -v-
Canara Bank and Ors. , 2019 (8) ADJ 272
were relied upon.

j. It is a settled proposition of law
that no lease beyond a period of 11 months
can be created without a registered
instrument as the same is barred by Section
106 of the Transfer of Property Act, 1882
(hereinafter referred to as the 'TPA 1882').
Since the lease is said to be by means of an
oral agreement the same is to be considered
to be a monthly lease wherein after the
expiry of the monthly lease period, fresh
oral lease is created and hence after
classification
of
the
loan
of
the
Respondents No. 5,6 and 7 as a NPA on
August 29, 2020 and the subsequent issue
of notice under Section 13(2) of the
SARFAESI Act on October 13, 2020, the
alleged oral lease in favour of the
Respondent No. 8 is barred by Section
13(13) of the SARFAESI Act.

k. The Respondent No. 8 has not
produced any document to prove the lease
to be a valid lease. As such, the Respondent
No. 8 has no right as a tenant in the said
property and the injunction order passed in
the Original Suit No. 198 of 2021 has no
application in the present proceedings nor
does it have any binding effect upon the
1 All. M/s Trilok Chand Fabrication Vs. State of U.P. & Ors.
827
present proceedings. Only the Borrower
and the Respondent No. 8 are parties to the
said suit. The said suit has been instituted
after commencement of proceedings under
Section 14 of the SARFAESI Act, and
hence the same is barred by Section 34 and
Section 35 of the SARFAESI Act. Even
otherwise the Respondent No. 8 cannot
seek injunction from eviction without due
process of law.

l. The interim injunction will have no
binding effect on the present proceedings as
the same is barred by the SARFAESI Act.
The oral tenancy alleged to have been
created in the instant case is governed by
the provisions of Section 65A of the TPA
1882 and hence the Respondent No. 8 is
not eligible for any relief.

Contentions by The Respondent No.
8

4. Learned advocate appearing on
behalf of the respondent no. 8 has made the
following submissions:

a. Respondent No. 8 is in actual
physical possession of the immovable
property in question as a tenant of the said
property. The tenancy in question has been
entered into between the Respondent No. 6
and the Respondent No. 8 herein and in
pursuance thereto, the Respondent No. 8
has deposited rent equivalent to 12 years as
an advance payment. The parties have also
executed a declaratory document in this
regard on May 02, 2019. In pursuance to
the tenancy created between the parties on
August 10, 2018, the Respondent No. 8 is
in physical possession of the property in
question.

b. It is submitted that the present
writ petition against the impugned order
passed under Section 14 of the SARFAESI
Act can only be challenged in proceedings
under Section 17 of the SARFAESI Act.
The present writ petition challenging the
impugned order is not maintainable before
this Court.

c. The aforesaid principle of law
has been clearly laid down by the Hon'ble
Supreme Court in the case of ICICI Bank
Limited
and
Others
-v-
Umakanta
Mohapatra and Ors., (2019) 13 SCC 497
and in Authorized Officer, State Bank of
Travancore and Anr. -v- Mathew K.C.,
(2018) 3 SCC 85.

d. The aforesaid judgments have
been followed by this Court in Writ-C No.
12664 of 2019 (Intazar Ali -v- State of
U.P. & 3 Others) dated April 24, 2019. In
view of the aforesaid judgments, the
present writ petition is not maintainable
under Article 226 of the Constitution of
India, as the petitioner has an alternative
efficacious remedy in the form of Section
17 of the SARFAESI Act.

e. It is further stated that the
injunction order does not in any manner
contravene the provisions of Section 34 r/w
Section
35 of
the
SARFAESI Act,
inasmuch as, the jurisdiction of the civil
court has only been barred in respect of any
debts, which are within the jurisdiction of
the
tribunals
constituted
under
the
SARFAESI Act. Since the suit in question
was only a suit for injunction instituted by
the tenant against his landlord/lessor, the
same is not barred either by Section 34 or
Section 35 of the SARFAESI Act.

f.
The
Additional
District
Magistrate could not have ignored the order
passed by a competent civil court while
deciding the application filed under Section
14 of the SARFAESI Act and hence, it has
rightly stayed its hands in view of the
injunction order.

g. The tenancy in question is a
tenancy, where no term or period has been
fixed between the parties and in view of
828 INDIAN LAW REPORTS ALLAHABAD SERIES
such fact, the tenancy in question is
deemed to be on month-to-month basis.
Registration of such a tenancy is not
necessary and hence the same would not be
hit by the provisions of Section 49 of the
Indian Registration Act, 1908 (hereinafter
referred to as the IRA, 1908).

h. Even in case of a tenancy, which
is not registered or in the case a month-tomonth tenancy, the court is not precluded
from taking into consideration, the factum of
creation of a tenancy or the agreement
between the lessor and the lessee. Creation of
a month-to-month tenancy created prior to
issuance of notice under Section 13(2) of the
SARFAESI Act cannot be rejected solely on
the ground that the same is contained in an
unregistered document.

i. The lease/agreement entered
between the borrower and the tenant has not
been determined till date and therefore, the
tenant cannot be dispossessed by the auction
purchaser from the property in question.

j. In view of such facts and
circumstances, it is submitted that the
present writ petition is not maintainable
before this Court under Article 226 of the
Constitution of India, and therefore, the
present writ petition is liable to be
dismissed by this Court.

Analysis and Conclusion

5. We have heard the learned counsel
appearing for the parties and perused the
materials on record.

6. In the instant case, the petitioner
has challenged the order dated April 18,
2023, on primarily two grounds. First, that
in the absence of a registered lease deed, no
tenancy can last beyond a period of 11
months, and second, that the Respondent
No. 3 should have determined the validity
of the tenancy itself, instead of keeping the
proceedings initiated under Section 14 of
the SARFAESI Act under abeyance. Hence,
for better adjudication of the issue at hand,
I have divided this judgment into four
issues:

Issue No. 1: - How are tenancy
rights determined beyond the period of 1
year under the TPA 1882?

Issue No. 2: - What is the
recourse available to a tenant during the
pendency of an application under Section
14 of the SARFAESI Act?

Issue
No.
3:
-
Can
civil
suits/proceedings be instituted during the
pendency of an application under Section
14 of the SARFAESI Act?

Issue No. 4: - Does the present
case call for the exercise of writ
jurisdiction by this Court?

Issue No. 1

7. Section 107 of the TPA 1882 states
that a lease of immovable property, for any
term exceeding one year, can be made only
by a registered instrument:

"107. Leases how made.-A
lease of immovable property from year to
year, or for any term exceeding one year, or
reserving a yearly rent, can be made only
by a registered instrument.

[All other leases of immovable
property may be made either by a
registered instrument or by oral agreement
accompanied by delivery of possession.]

[Where a lease of immovable
property
is
made
by
a
registered
instrument, such instrument or, where there
are more instruments than one, each such
instrument shall be executed by both the
lessor and the lessee:

Provided
that
the
State
Government may, [***] from time to time,
by notification in the OfficialGazette, direct
1 All. M/s Trilok Chand Fabrication Vs. State of U.P. & Ors.
829
that leases of immovable property, other
than leases from year to year, or for any
term exceeding one year, or reserving a
yearly rent, or any class of such leases,
may be made by unregistered instrument or
by oral agreement without delivery of
possession."

8. Section 17 of the IRA, 1908 also
states that leases of immovable property
beyond any term exceeding one year must
be registered:

"17. Documents of which registration
is compulsory.-(1) The following documents
shall be registered, if the property to which
they relate is situate in a district in which,
and if they have been examined on or after
the date on which, Act XVI of 1864, or the
Indian Registration Act, 1866 (20 of 1866),
or the Indian Registration Act, 1871 (8 of
1871), or the Indian Registration Act, 1877 (3
of 1877), or this Act came or comes into
force, namely-

(a) instruments of gift of immovable
property;

(b)
other
non-testamentary
instruments which purport or operate to
create, declare, assign, limit or extinguish,
whether in present or in future, any right,
title
or
interest,
whether
vested
or
contingent, of the value of one hundred
rupees and upwards, to or in immovable
property;

(c)
non-testamentary
instruments
which acknowledge the receipt or payment
of any consideration on account of the
creation,
declaration,
assignment,
limitation or extinction of any such right,
title or interest; and

(d) lease of immovable property from
year to year, or for any term exceeding
one year, or reserving a yearly rent;

[(e)
non-testamentary
instruments
transferring or assigning any decree or
order of a Court or any award when such
decree or order or award purports or
operates to create, declare, assign, limit or
extinguish, whether in present or in future,
any right, title or interest, whether vested
or contingent, of the value of one hundred
rupees and upwards, to or in immovable
property :

Provided that the State Government
may,
by
order
published
in
the
OfficialGazette, exempt, from the operation
of this sub-section any leases executed in
any district, or part of a district, the terms
granted by which do not exceed five years
and the annual rents reserved by which do
not exceed fifty rupees"

9. In Shri Janki Devi Bhagat Trust,
Agra -v- Ram Swarup Jain (Dead) by Lrs.,
(1995) 5 SCC 314, the Hon'ble Supreme
Court held that the lease of an immovable
property, beyond any term exceeding one
year can only be made through a registered
instrument. Relevant paragraph from the
said judgment has been reproduced below:

"4.Under Section 107 of the Transfer
of Property Act a lease of immovable
property from year to year or for any term
exceeding one year can be made only by a
registered instrument. Any lease of this kind
would be void unless it is created by a
registered instrument. All other leases of
immovable property may be made either by
a registered instrument or by an oral
agreement accompanied by delivery of
possession. All the courts below have held
that there was a valid lease. The High
Court has also recorded that it was not the
contention of the respondent that his lease
was from year to year. The contention was
that the lease was for a term exceeding one
year and was, therefore, compulsorily
registerable under the first part of Section
107 of the Transfer of Property Act. This
830 INDIAN LAW REPORTS ALLAHABAD SERIES
contention has been negatived by the High
Court as also by both the courts below. The
High Court has held that the lease was not
for a term exceeding one year, and so was
not compulsorily registerable under the
first part of Section 107. It, however, held
that
since
the
lease
was
for
a
manufacturing purpose, six months' notice
to quit was required under Section 106. In
its absence, termination was not valid."

10. This Court, in Kiran Dhawan -v-
Vivek Mittal and Anr., 2018 SCC OnLine
All 25, expounded that only through a
registered instrument, can a lease for any
term exceeding one year be made. This
Court
after
considering
the
Hon'ble
Supreme Court's judgment in Samir
Mukherjee -v- Davinder Kumar Bajaj,
(2001) 5 SCC 259 reiterated that an oral
agreement, cannot result in creation of a
valid lease from year to year. Relevant
paragraphs from the aforesaid judgment
have been extracted below:

"8. Under Section 107, a lease of
immovable property from year to year, or
for any term exceeding one year, or
reserving a yearly rent, can be made only
by a registered instrument. The second
paragraph of Section 107, as applicable in
the State of U.P. provided that all other
leases of immovable property may be made
either by a registered instrument or, by an
agreement oral or accompanied by delivery
of possession. Section 106, provides that in
the absence of a contract or local law or
usage to the contrary, a lease of immovable
property for agricultural or manufacturing
purposes shall be deemed to be a lease
from year to year, terminable, on the part of
either lessor or lessee, by six months'
notice; and a lease of immovable property
for any other purpose shall be deemed to
be a lease from month to month,
terminable, on the part of either lessor or
lessee, by fifteen days' notice. Under the
U.P. Amendment, the period of notice stood
substituted to thirty days. Later on, by
virtue of Central Amendment by Act 3 of
2003, the earlier position stood restored,
however, nothing turns upon the same as
the notice is not being challenged on the
said ground.

9. InSamir Mukerjee(supra), upon
which reliance has been placed by the court
below, an identical plea was considered.
The tenancy in that case was created by an
oral agreement. The Supreme Court, after
considering the interplay between Section
106 and Section 107 held that Section 106
lays down a rule of construction which
would apply only when the parties had not
specifically agreed upon as to whether the
lease is yearly or monthly. It was held that
in case there was a valid agreement
between the parties regarding the duration
of a lease, section 106 would have no
application. On the other hand, Section 107
prescribes the procedure for execution of
lease. Thus, where the lease is from year to
year or for any term exceeding one year or
reserving yearly rent, it can be made only
by a registered instrument and not
otherwise. The Supreme Court held that
since there was no registered lease
agreement but only an oral agreement, it
would not result in creation of a valid lease
from year to year in view of the inhibition
contained in first paragraph of Section 107
nor the rule of construction embodied in
Section 106 would come into play. The
relevant observations made in this regard
in the said judgement are quoted below:-

"5. Section 106 lays down a rule of
construction, which is to apply when the
parties have not specifically agreed upon
as to whether the lease is yearly or monthly
between the parties. On a plain reading of
this section it is clear that legislature has
1 All. M/s Trilok Chand Fabrication Vs. State of U.P. & Ors.
831
classified
leases
in
two
categories
according to their purposes and this section
would be attracted to construe the duration
of a valid lease in the absence of a contract
or local law or usage to the contrary.
Where the parties by a contract have
indicated the duration of a lease; this
section would not apply. What this section
does is to prescribe the duration of the
period of different kinds of leases by legal
fiction-leases
for
agricultural
or
manufacturing purposes shall be deemed to
be lease from year to year and all other
leases shall be deemed to be from month to
month. Existence of a valid lease is a prerequisite to invoke the rule of construction
embodied in Section 106 of Transfer of
Property Act.

6.
Section
107
prescribes
the
procedure for execution of a lease between
the parties. Under the first paragraph of
this section a lease of immovable property
from year to year or for any term exceeding
one year or reserving yearly rent can be
made only by registered instrument and
remaining classes of leases are governed by
the second paragraph that is to say all
other leases of immovable property can be
made either by registered instrument or by
oral agreement accompanied by delivery of
possession.
7. In the case in hand we are concerned
with an oral lease which is hit by the first
paragraph of Section 107 of the Transfer of
Property Act. Under Section 107 parties
have an option to enter into a lease in
respect of an immovable property either for
a term less than a year or from year to year,
for any term exceeding one year or
reserving a yearly rent. If they decide upon
having a lease in respect of any immovable
property from year to year or for any term
exceeding one year, or reserving yearly
rent, such a lease has to be only by a
registered instrument. In 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 the rule of construction
embodied therein would not be attracted.
The above is the legal position on a
harmonious reading of both the sections.

***

10. In the present case though the
appellant has claimed that it was a lease
for manufacturing purpose, admittedly
there was no registered written lease.
Therefore,
rule
of
construction
as
envisaged in Section 106 would not be
applicable as the statutory requirement of
Section 107 of the Act has not been
satisfied. The plea of the appellant that 15
days
notice
terminating
the
present
tendency is bad in law would not be
sustainable"

11. What emerges from a perusal of
the aforesaid judgments is that the bar
contained under Section 107 of the TPA
1872 is absolute. As a result, under no
circumstances an unregistered instrument
can create a valid lease beyond a period of
one year. Furthermore, an oral argument
cannot create a valid lease from year to
year. IRA, 1908 also compulsorily requires
lease of an immovable property created for
a term exceeding one year to be registered.
In absence of such registration, courts
cannot take such a lease into consideration
as the same would attract the bar contained
under Section 49 of the IRA, 1908.

12. It was argued by the Respondent
No. 8 before this Court that since the
tenancy in question is a tenancy, where no
period has been fixed, the tenancy in
question is deemed to be on month-tomonth basis and as such, registration is not
832 INDIAN LAW REPORTS ALLAHABAD SERIES
necessary. However, this argument bears no
weight given the present circumstances. As
the law stands, if a tenant claims possession
of a secured asset beyond the prescribed
period under Section 107 of the TPA 1872,
he is required to produce a registered
instrument executed in his favour.

13. This Court in Agme Marketing
Private Limited and Anr. -v- Canara Bank
and Ors. (supra), considered the rights of a
tenant in case of a monthly tenancy, and the
proceedings initiated under the SARFAESI
Act, 2002 as follows:

"30. The Court may then consider the
rights of the petitioners proceeding on the
assumption that a monthly tenancy came to
be created in their favour. If this contention
were to be accepted, it would necessarily
bid the Court to presume the creation of a
tenancy on the first date of every month
and its expiry on the last date of that
month.
The
problem,
however,
in
considering whether this tenancy would
stand saved and not be contrary to the
provisions of the 2002 Act arises when one
takes into consideration the injunction as
engrafted
in
Section
13(13)
thereof.
Subsection (13) restrains a borrower from
transferring by way of sale, lease or
otherwise the secured asset after receipt of
a notice under Section 13(2) without the
prior written consent of the secured
creditor. Undisputedly even a monthly
tenancy can be recognised to have come
into existence only as an outcome of a
bilateral and consensual act of parties. The
acceptance of the contention addressed at
the behest of the petitioners compels this
Court to view the creation of a monthly
tenancy by the original borrower in favour
of the petitioners at the beginning of every
month. This would logically lead to the
creation of a monthly tenancy even after 09
October 2012 when the Section 13(2)
notice came to be issued. The creation of a
monthly tenancy cannot be viewed as an
extension or renewal of an earlier term. It
essentially and in law amounts to the
creation of a fresh tenancy at the beginning
of every month. If this submission of a
monthly tenancy as urged on behalf of the
petitioners is accepted, it would lead to a
logical conclusion of a monthly tenancy
being created and coming into existence
even after the Section 13(2) notice came to
be issued. It is not the case of the
petitioners that the so called monthly
tenancy came to be created with the prior
and written consent of the secured creditor.
Viewed in that light it is manifest that the
provisions of Section 13(13) would stand
breached. 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
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."

Therefore, a monthly tenancy, cannot
entitle a lessee to claim possession of a
secured asset after proceedings have been
initiated under Section 14 of the SARFAESI
Act.

14. At this juncture, this Court also
considers it pertinent to refer to the
judgment of the Hon'ble Supreme Court in
Harshad
Govardhan
Sondagar
-v-
International
Assets
Reconstruction
Company Ltd (supra), wherein the Hon'ble
Supreme Court held that if a tenant claims
possession of a secured asset for any term
exceeding one year from the date of the
1 All. M/s Trilok Chand Fabrication Vs. State of U.P. & Ors.
833
lease made in his favour, he must produce a
registered instrument. We have extracted
the relevant paragraphs from the said
judgment below:

"36. We may now consider the
contention of the respondents that some of
the appellants have not produced any
document to prove that they are bona fide
lessees of the secured assets. We find that in
the cases before us, the appellants have relied
on the written instruments or rent receipts
issued by the landlord to the tenant. Section
107 of the Transfer of Property Act provides
that a lease of immovable property from year
to year, or for any term exceeding one year or
reserving a yearly rent, can be made "only by
a registered instrument" and all other leases
of immovable property may be made either by
a registered instrument or by oral agreement
accompanied by delivery of possession.
Hence, if any of the appellants claim that
they are entitled to possession of a secured
asset for any term exceeding one year from
the date of the lease made in his favour, he
has to produce proof of execution of a
registered instrument in his favour by the
lessor. Where he does not produce proof of
execution of a registered instrument in his
favour and instead relies on an unregistered
instrument or oral agreement accompanied
by delivery of possession, the Chief
Metropolitan Magistrate or the District
Magistrate, as the case may be, will have to
come to the conclusion that he is not entitled
to the possession of the secured asset for
more than a year from the date of the
instrument or from the date of delivery of
possession in his favour by the landlord."

(Emphasis Added)

15.

Furthermore,
the
Hon'ble
Supreme Court in its judgment in Bajrang
Shyamsunder Agarwal -v- Central Bank
of India (supra) examined the interplay
between the SARFAESI Act and the rights
of the tenants. The Hon'ble Supreme Court
in the aforesaid case held that in case a
tenant claims possession of a secured asset
based on an unregistered instrument or an
oral agreement, accompanied by delivery
of possession, the tenant will not be entitled
to the possession of the secured asset
beyond the period prescribed under Section
107 of the TPA 1882. Relevant paragraphs
from the said judgment have been extracted
below:

"17.The
interplay
between
theSarfaesiAct and the right of the tenant was
first examined by this Court inHarshad
Govardhan
case[Harshad
Govardhan
Sondagarv.International
Assets
Reconstruction Co. Ltd., (2014) 6 SCC 1 :
(2014) 3 SCC (Civ) 1] . It may be noted that
the present appellant was a party to the
aforesaid proceedings. This Court was
confronted with the question as to whether
the provisions of theSarfaesiAct affect the
right of a lessee to remain in possession of
the secured asset during the period of the
lease. After noticing the scheme of the Act,
this Court held that if the lawful possession of
the secured asset is not with the borrower, but
with a lessee under a valid lease, the secured
creditor cannot take possession of the secured
asset until the lawful possession of the lessee
gets determined and the lease will not get
determined if the secured creditor chooses to
take any of the measures specified in Section
13 of theSarfaesiAct. Accordingly, this Court
concluded that the Chief Metropolitan
Magistrate/District Magistrate can pass an
order for delivery of possession of secured
asset in favour of secured creditor only when
he finds that the lease has been determined in
accordance with Section 111 of the TP Act.

18.The Court further held that if the
Chief
Metropolitan
Magistrate/District
Magistrate is satisfied that a valid lease is
834 INDIAN LAW REPORTS ALLAHABAD SERIES
created before the mortgage and the lease
has not been determined in accordance
with Section 111 of the TP Act, then he
cannot pass an order for delivery of
possession of the secured asset to the
secured creditor. In case, he comes to the
conclusion that there is no valid lease
either before the creation of mortgage or
after the creation of the mortgage satisfying
the requirements of Section 65-A of the TP
Act or even though there is a valid lease the
same stands determined in accordance with
Section 111 of the TP Act, he can pass an
order for delivery of possession of the
secured asset to the secured creditor.

***

23. While we agree with the principle
laid out inVishal N. Kalsaria case[Vishal N.
Kalsariav.Bank of India, (2016) 3 SCC 762
: (2016) 2 SCC (Civ) 452] that the tenancy
rights under the Rent Act need to be
respected in appropriate cases, however,
we believe that the holding with respect to
the restricted application of the non
obstante clause under Section 35 of
theSarfaesiAct, to only apply to the laws
operating in the same field is too narrow
and such a proposition does not follow
from the ruling of this Court inHarshad
Govardhan
case[Harshad
Govardhan
Sondagarv.International
Assets
Reconstruction Co. Ltd., (2014) 6 SCC 1 :
(2014) 3 SCC (Civ) 1] .

24.In our view, the objective of
theSarfaesiAct, coupled with the TP Act
and the Rent Act are required to be
reconciled herein in the following manner:

24.1.If a valid tenancy under law is in
existence even prior to the creation of the
mortgage, the tenant's possession cannot
be disturbed by the secured creditor by
taking possession of the property.