# V-Mart Retail Ltd., Gurgaon v. L.I.C. Housing Finance Ltd., Lucknow & Ors

- **Citation:** (2023) 6 ILRA 484
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-04-19
- **Case number:** Writ-C No. 39191 of 2022
- **Bench:** Manoj Kumar Gupta, Prashant Kumar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/v-mart-retail-ltd-gurgaon-v-l-i-c-housing-finance-ltd-lucknow-ors-50312
- **Pages:** 6

## Headnote

Law
-
Securitisation
and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act,
2002 - Section 14. Issue: Whether a
secured creditor, in exercise of its power
under the Act, could take actual physical
possession
of
the
secured
asset
in
possession of a lessee? Held: The Apex
Court in Harshad Govardhan Sondagar
categorized leases into three classes: i
Lease created before the property was
mortgaged: It was held that, in such
cases, the lessee will have the right to
enjoy the leased property in accordance
with the terms and conditions of the lease,
irrespective of whether the subsequent
mortgagee of the immovable property had
knowledge of such lease or not. ii Lease
created
after
the
execution
of
the
mortgage deed: In cases where the
mortgage deed does not prohibit the
mortgagor from making a lease of the
mortgaged property, and so long as the
lease satisfies the requirements of subsection (2) of Section 65-A of the Transfer
of Property Act, it would be valid and
binding on the secured creditor. iii Lease
created after service of notice under
Section 13(2): Such a lease would be void
6 All. V-Mart Retail Ltd., Gurgaon Vs. L.I.C. Housing Finance Ltd., Lucknow & Ors.
485
in view of Section 13(13) of the Act and
not binding on the secured creditor.
Supreme
Court
also
held
that
the
provisions of the Act do not abridge the
rights
of
the
lessees
falling
under
categories (i) and (ii), nor result in
termination of the lease. However, this
would not be true for cases falling under
category (iii). In cases where the secured
asset is in possession of a lawful tenant,
the secured creditor will have the right to
receive any money due, or which may
become due (including rent), from the
lessee of the borrower after the expiry of
sixty days of notice under Section 13(2) of
the Act. Possession of the secured asset
from a lessee in lawful possession under a
valid lease is not required to be taken
under the provisions of the SARFAESI Act
(Paras 9, 11).

Allowed. (E-5)

List of Cases cited:

## Text

484 INDIAN LAW REPORTS ALLAHABAD SERIES

15. Merely because a person lower in
order of preference has encroached upon
Gaon Sabha land, he cannot and should not
be granted the benefit of Section 67A
unless and until he is in a position to
establish categorically that a person higher
in preference is not available in the village.
Any other interpretation of Section 67A
would result in great injustice as an
unauthorized occupant would be liable to
be granted its benefit only on account of
him or her having illegally encroached
upon Gaon Sabha property, despite other
needier and persons higher in preference
being available in the village.

16. Therefore, and for the reasons
given above, this Court is constrained to
hold that not only is the land in issue in this
writ petitions not land governed by Section
63 of the Code, as it has not been reserved
for allotment as abadi site, the petitioners
are also, prima facie, not eligible to the
benefit of Section 67A as their applications
are bereft of necessary pleadings. Therefore
on both counts the benefit of Section 67A
cannot be extended to the petitioners.

17. Although, reference has also been
made in the writ petition as also the
applications
under
Section
67A
to
provisions of the U.P. Zamindari Abolition
and Land Reforms Act, such reference or
reliance, in my considered opinion, is not
tenable because on date, as also on the date
the applications under Section 67A have
been filed by the petitioners, the said Act,
namely U.P. Zamindari Abolition and Land
Reforms Act stood repealed.

18. In view of the foregoing, these
writ
petitions
lack
force
and
are
accordingly dismissed.
----------
(2023) 6 ILRA 484
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 19.04.2023

BEFORE

THE HON'BLE MANOJ KUMAR GUPTA, J.
THE HON'BLE PRASHANT KUMAR, J.

Writ-C No. 39191 of 2022

V-Mart Retail Ltd., Gurgaon ...Petitioner
Versus
L.I.C. Housing Finance Ltd., Lucknow &
Ors. ...Respondents

Counsel for the Petitioner:
Sri Jitendra Prasad

Counsel for the Respondents:
C.S.C., Pranjal Mehrotra
Civil
Law
-
Securitisation
and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act,
2002 - Section 14. Issue: Whether a
secured creditor, in exercise of its power
under the Act, could take actual physical
possession
of
the
secured
asset
in
possession of a lessee? Held: The Apex
Court in Harshad Govardhan Sondagar
categorized leases into three classes: i
Lease created before the property was
mortgaged: It was held that, in such
cases, the lessee will have the right to
enjoy the leased property in accordance
with the terms and conditions of the lease,
irrespective of whether the subsequent
mortgagee of the immovable property had
knowledge of such lease or not. ii Lease
created
after
the
execution
of
the
mortgage deed: In cases where the
mortgage deed does not prohibit the
mortgagor from making a lease of the
mortgaged property, and so long as the
lease satisfies the requirements of subsection (2) of Section 65-A of the Transfer
of Property Act, it would be valid and
binding on the secured creditor. iii Lease
created after service of notice under
Section 13(2): Such a lease would be void
6 All. V-Mart Retail Ltd., Gurgaon Vs. L.I.C. Housing Finance Ltd., Lucknow & Ors.
485
in view of Section 13(13) of the Act and
not binding on the secured creditor.
Supreme
Court
also
held
that
the
provisions of the Act do not abridge the
rights
of
the
lessees
falling
under
categories (i) and (ii), nor result in
termination of the lease. However, this
would not be true for cases falling under
category (iii). In cases where the secured
asset is in possession of a lawful tenant,
the secured creditor will have the right to
receive any money due, or which may
become due (including rent), from the
lessee of the borrower after the expiry of
sixty days of notice under Section 13(2) of
the Act. Possession of the secured asset
from a lessee in lawful possession under a
valid lease is not required to be taken
under the provisions of the SARFAESI Act
(Paras 9, 11).

Allowed. (E-5)

List of Cases cited:

1.
Harshad
Govardhan
Sondagar
Vs
International
Assets
Reconstruction
Comp.
Limited & ors., (2014) 6 SCC 1.
2. Vishal N. Kalsaria vs. Bank of India & ors.,
(2016) 3 SCC 762.
(Delivered by Hon'ble Manoj Kumar
Gupta, J.
&
Hon'ble Prashant Kumar, J.)

1. The instant petition has been filed
praying
for
a
writ
of
mandamus
commanding the respondents to consider
the representation of the petitioner dated
24.11.2020
and
not
dispossess
the
petitioner from Property No.3/67, Rui Ki
Mandi, Shahganj, Agra or interfere in the
running of business by the petitioner in the
said premises.

2. The facts necessary for disposal of
the petition are that the petitioner is a
company
incorporated
under
the
Companies Act. It is running its retail
business from the aforesaid premises in
pursuance
of
a
Memorandum
of
Understanding (MOU) dated 10.5.2016
between it and respondents no.4 to 8, the
owners of the premises (hereinafter for
short 'the lessors'). According to the MOU,
the petitioner was let out ground floor and
first floor of the building admeasuring
11300 square feet. The lessors were to hand
over possession of the premises to the
petitioner on or before 25.05.2016. The
petitioner was given right to vacate the
demised premises after serving a three
months' notice on the lessors. On the other
hand, the lessors were given right of
forfeiture of tenancy only when there was
continuous default of three months or more
in payment of rent and the petitioner fails
to pay it within one month of receipt of
notice of demand. Subsequently, registered
lease agreement dated 15.03.2017 was also
executed between the parties. The lease
agreement
mentions
the
date
of
commencement of the lease as 1st July,
2016. The rent for the carpet area of 11000
square feet was approximately Rs.29 per
month per square feet payable before 10th
of every calendar month. The monthly
lease rent was liable to enhancement after
regular
intervals.
According
to
the
petitioner, in terms of the Memorandum of
Understanding and the registered lease
deed, it occupied the demised premises and
is carrying on its retail business therefrom.

3. On 20.02.2020, the petitioner
received
a
notice
from
the
second
respondent i.e. LIC Housing Finance Ltd.
from which it came to know that the
demised property was equitably mortgaged
by the lessors in its favour. On 23.11.2020,
the second respondent fixed a possession
notice
on
the
demised
premises
in
486 INDIAN LAW REPORTS ALLAHABAD SERIES
purported exercise of its powers under the
Securitisation
and
Reconstruction
of
Financial Assets and Enforcement of
Security Interest Act, 2002 (for short 'the
Act'). The petitioner on 24.11.2020 filed a
detailed objection before the
second
respondent mentioning therein about the
MOU dated 10.5.2016 and registered lease
deed dated 15.6.2017 and requested the
second respondent to immediately stop
proceedings for taking actual physical
possession of the leased property. The
petitioner also made a prayer that in case
the property is auctioned, the auction
purchaser be informed that he would step
into the shoes of the lessors/borrowers, but
shall not be entitled to actual physical
possession
as
the
property
was
in
possession of a lawful tenant. However, the
second respondent did not take notice of
the said objection and threatened to take
possession of the leased property and
consequently, the instant petition.

4. The second respondent has filed a
counter affidavit in which the stand taken is
that the private respondents (lessors) had
taken a loan of Rs.2,35,00,000/- on
28.2.2017 from it and had equitably
mortgaged the property in question in
favour of the second respondent by deposit
of title deeds. The date on which equitable
mortgage was allegedly created, has not
been disclosed in the counter affidavit. The
date of issuance of notice under Section 13
(2) of the Act is 5.12.2019. The date of
issuing possession notice is 23.11.2020. It
is admitted to the second respondent that it
had filed an application under Section 14 of
the Act for delivery of actual physical
possession of the aforesaid property and the
said application is pending.

5. It is clear from the stand taken by
the second respondent that it proposes to
take actual physical possession of the
property in question in exercise of its rights
under the Act.

6.

The
private
respondents
(lessors/borrowers) were sent notices by
registered post. It is clear from the track
consignment report of Indian Post that the
notices were delivered to them, but none
had appeared on their behalf. Service on
the aforesaid respondents was held to be
sufficient by order dated 13.4.2023.

7. Learned counsel for the petitioner
submits that the petitioner being a lawful
lessee of the aforesaid premises and the
lease having been created in its favour
before the sanction of loan and creation of
equitable mortgage, the second respondent
is not entitled to take actual physical
possession of the demised premises. At
best, only symbolic possession could be
taken and in which event, it would step into
the shoes of the borrowers and would only
be entitled to claim rent from the petitioner.
In support of his submission, learned
counsel for the petitioner has placed
reliance on the judgements of the Supreme
Court in Harshad Govardhan Sondagar
Vs. International Assets Reconstruction
Company Limited and others, and
Vishal N. Kalsaria Vs. Bank of India and
others.

8. Sri Pranjal Mehrotra, learned
counsel appearing on behalf of the second
respondent
submitted
that
since
the
registered lease deed was executed on
15.03.2017, after the sanction of loan on
28.02.2017 and, therefore, the petitioner is
not entitled to benefit of the aforesaid
judgements. He further submitted that even
if it is held that the petitioner is not liable to
be evicted, it be clarified that the secured
6 All. V-Mart Retail Ltd., Gurgaon Vs. L.I.C. Housing Finance Ltd., Lucknow & Ors.
487
creditor (the second respondent) would be
entitled to realise rent from the petitioner.

9. In Harshad Govardhan Sondagar
(supra), the Supreme Court had considered
the issue as to whether a secured creditor in
exercise of its power under the Act could
take actual physical possession of the
secured asset in possession of lessee. The
Supreme Court, after considering the entire
scheme
of
the
Securitisation
and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
and the provisions of the Transfer of
Property Act, 1882 categorised the leases
into three classes as follows:-

(i) lease created before the
property was mortgaged- it was held that in
a such case, the lessee will have right to
enjoy the leased property in accordance
with the terms and conditions of the lease,
irrespective of whether the subsequent
mortgagee of the immovable property had
knowledge of such lease or not.

(ii)
lease
created
after
the
execution of mortgage deed- in case the
mortgage deed does not prohibit the
mortgagor from making a lease of the
mortgaged property and so long as the lease
satisfies the requirement of sub-section (2)
of Section 65-A of the Transfer of Property
Act, it would be valid and binding on the
secured creditor.

(iii) lease created after service of
notice under Section 13 (2)- such a lease
would be void in view of Section 13 (13) of
the Act and not binding on the secured
creditor.

10. The Supreme Court also held that
the provisions of the Act do not abridge the
right of the lessees falling under category
(i) and (ii) nor results in termination of the
lease. However, this would not be true for
cases falling under category (iii). Relevant
part of the Law Report is extracted below:-

"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 sub- section (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. Sub- section
(13) of Section 13o f the SARFAESI Act,
however, provides that after receipt of notice
referred to in sub- section (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 65A 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."

11. The next issue considered in the
judgment
was
whether
the
Chief
488 INDIAN LAW REPORTS ALLAHABAD SERIES
Metropolitan
Magistrate
or
District
Magistrate is empowered to deliver actual
physical possession of the secured asset to
the secured creditor under Section 14 of the
Act even in cases where the secured asset is
in possession of a lawful tenant. In such
cases, it has been held that the secured
creditor will have right to receive any
money due or which may become due,
including rent from the lessee of the
borrower after expiry of sixty days of
notice under Section 13 (2) of the Act. In
order to protect his possession, the lessee
would be entitled to place material before
the Chief Metropolitan Magistrate or the
District Magistrate and satisfy him that
there was a valid lease created before the
mortgage or after the mortgage, in
accordance with the requirements of
Section 65-A of the Transfer of Property
Act and the lease has not been determined
in accordance with Section 111 of the
Transfer of Property Act and in which
event, the Chief Metropolitan Magistrate or
the District Magistrate, as the case may be,
cannot pass an order for delivering
possession of the secured asset to the
secured creditor. The relevant observations
in the judgment are as follows:-

"Hence, possession of the secured
asset from a lessee in lawful possession
under a valid lease is not required to be
taken
under
the
provisions
of
the
SARFAESI Act and the Chief Metropolitan
Magistrate or the District Magistrate,
therefore, does not have any power under
Section 14 of the SARFAESI Act to take
possession of the secured asset from such a
lessee and hand over the same to the
secured creditor."

12. The law laid down in Harshad
Govardhan Sondagar was followed by the
Supreme Court in Vishal N. Kalsaria Vs.
Bank of India and others and it has been
further clarified as follows:-

"It is a settled position of law that
once tenancy is created, a tenant can be
evicted only after following the due process
of law, as prescribed under the provisions
of the Rent Control Act. A tenant cannot be
arbitrarily evicted by using the provisions
of the SARFAESI Act as that would
amount to stultifying the statutory rights of
protection given to the tenant. A non
obstante
clause
(Section
35
of
the
SARFAESI Act) cannot be used to
bulldoze the statutory rights vested on the
tenants under the Rent Control Act. The
expression ''any other law for the time
being in force' as appearing in Section 35
of the SARFAESI Act cannot mean to
extend to each and every law enacted by
the Central and State legislatures. It can
only extend to the laws operating in the
same field."

13. In the instant case, although it is
argued that the registered lease deed was
executed on 15.03.2017, after sanction of
the loan, but it is not disputed that it was
preceded
by
a
memorandum
of
understanding dated 10.5.2016 under which
the petitioner became entitled to occupy the
premises as lessee on or before 25.5.2016
and
the
registered
lease
agreement
specifically
recites
that
the
tenancy
commenced from 1st July, 2016. The
possession of the petitioner as lessee since
the aforesaid date is not in dispute.
Therefore, we are of the opinion that the
case of the petitioner would be covered
under category (i) and the possession of the
petitioner could not be disturbed by the
second respondent under the provisions of
the Act unless the lease is validly
determined as per contract of tenancy or the
statutory provisions. At the same time, the
6 All. Committee of Management, D.P. Public School, Gautambudh Nagar Vs. State of U.P. &
 Ors.
489
second respondent having already served
notice under Section 13 (2) and sixty days
period had expired since then, it had
become entitled to realise rent from the
petitioner, in enforcement of its rights as a
secured creditor.

14. In the facts obtaining above, we
are of the opinion that no purpose would be
served in relegating the petitioner to agitate
its claim before the District Magistrate or
Chief Metropolitan Magistrate. It will only
lead to procrastination of the litigation.

15. Accordingly, we dispose of the
instant petition restraining the second
respondent from taking actual physical
possession of the property in question from
the petitioner until the lease is determined
in accordance with law. The petitioner will,
however, be liable to pay rent from now
onwards to the second respondent and the
said amount will be appropriated by it
towards adjustment of the outstanding
liability of the borrowers, in respect of the
loan taken by them.
----------
(2023) 6 ILRA 489
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 05.05.2023

BEFORE

THE HON'BLE MRS. SUNITA AGARWAL, J.
THE HON'BLE VIPIN CHANDRA DIXIT, J.

Writ-C No. 54341 of 2010
Writ-C No. 55314 of 2011
Writ-C No. 56451 of 2011
Writ-C No. 7490 of 2012
Writ-C No. 20719 of 20193
Writ-C No. 11159 of 20193
Writ-C No. 11157 of 20193

Committee of Management, D.P. Public
School, Gautambudh Nagar ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Ravi Agrawal, Sri P.K. Chaurasia

Counsel for the Respondents:
C.S.C., Sri Ramendra Pratap Singh, Sri
Suresh Singh, Sri Manish Goyal (Sr. Adv.)

Civil Law- Code of Civil Procedure-1908Section 114, Order 47 Rule 1- It is well
settled that error apparent on the face of
the record should not be an error which
has to be fished out and searched-The
power of review can be exercised for
correction of a mistake but not to
substitute a view-that though it can be
argued by the counsel for the review
applicant that some material such as
Master plan, the nature of the project, the
land use of the acquired land were not
taken into consideration by the Court in
the original judgment (under review),
however,
consideration
of
the
said
arguments
would
require
us
to
appreciate the material on record which
was allegedly ignored by the Court in
the original order and the said exercise
of re-hearing being impermissible within
the scope of review-No good ground to
exercise the power of review in the
instant case-The judgment and order of
this Court under review having attained
finality between the parties, in case of
any mistake on the part of the Court in
ignoring the pleadings on record and
arriving at a different conclusion by
considering
the
other
material
on
record, only remedy before the review
applicant was to approach the Apex
Court placing the alleged wrong in the
judgment under review-(Para 31, 32 &
39)

Review application dismissed. (E-15)

List of Cases cited:

1.
Sahara
India
Commercial
Corporation
Limited & ors. Vs St. of U. P. & ors. (2017) 11
SCC 339