G.Satyanarayana V. Union of India,

WP/23073/2009

AI Insights

The case involves G. Satyanarayana, the petitioner, who claimed to be a tenant of a property where auction proceedings were initiated under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by the Union Bank of India. The petitioner challenged the constitutional validity of sub-rule (9) of Rule 9 of the Security Interest (Enforcement) Rules, 2002, arguing it was arbitrary and illegal. The court, referencing the Supreme Court's decision in Mardia Chemicals Ltd. v. Union of India, upheld the validity of Section 13(4) of the Act and dismissed the challenge to sub-rule (9), suggesting that the petitioner could contest the manner of possession through the appropriate appellate authority.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 724879 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 29-10-2009
• Assessment Year: misc
• Other Referred Cases: Mardia Chemicals Ltd. v. Union of India, C.B. Gautam v. Union of India
• Laws Referred To: Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Security Interest (Enforcement) Rules, 2002, Constitution of India
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Arbitrary action; Enforcement of Security; Possession; Possession; Security interest; Tenant rights; Writ of Mandamus
• Section: 8; 13(4); 9(9)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE TWENTY NINTH DAY OF OCTOBER TWO THOUSAND AND NINE PRESENT THE HON'BLE MR JUSTICE A.GOPAL REDDY and THE HON'BLE MR JUSTICE K.C.BHANU WRIT PETITION NO : 23073 of 2009 Between: G.Satyanarayana ..... PETITIONER AND Union of India, rep. by its Secretary, Law & Legislative Affairs, New Delhi & Others. .....RESPONDENTS The Court made the following : HON’BLE SRI JUSTICE A. GOPAL REDDY AND HON'BLE SRI JUSTICE K.C.BHANU WRIT PETITION No. 23073 OF 2009 ORDER: (Per Hon’ble Sri Justice A. Gopal Reddy) Petitioner claiming to be the tenant of the schedule premises in respect of which auction proceedings is initiated under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘Act’) by the Union Bank of India, Warangal branch-5th respondent herein filed the writ petition for issuance of a writ of mandamus declaring Section 13(4) of the Act read with Rule 8 and sub-rule (9) of Rule 9 of the Security Interest (Enforcement) Rules, 2002 (for short ‘Rules’) as arbitrary, illegal, ultra vires, violative of Articles 14,19,21 and 300-A of Constitution of India and consequently declare that the action of respondents 3 to 5 in getting painted that ‘actual possession was taken’ on shutter door of leased premises bearing H.No.8-11-2, situated at J.P.N.Road, Warangal in possession of respondent No.4 as arbitrary and illegal. Learned counsel for the petitioner fairly conceded that in view of law declared by the Supreme Court in Mardia Chemicals Ltd. v. Union of India[1] wherein the constitutional validity of Section 13(4) of the Act has been upheld, he is not pressing the relief for declaration of Section 13(4) of the Act as ultra vires, but he is only challenging the rub- rule (9) of Rule 9 of the Rules as arbitrary and illegal. According to the petitioner, he is a lessee of the mulgi in the ground floor of the house bearing municipal No.8-11-2, situated at J.P.N. Road, Warangal, wherein he is carrying on business in electronic goods in the name and style of ‘Dinesh Electronics’. The respondent No.6 is the landlord of the premises who received a sum of Rs.4 lakhs from the petitioner on 15.2.2005 towards deposit of the amount which is refundable at the time of vacating the premises and that he also took a sum of Rs.2,99,900/- by way of loan from the petitioner. During the course of business, the petitioner also invested huge amounts. While so, the respondent Nos.5 and 6 without any prior notice and information to the petitioner, closed down the shop on 24.10.2009 with the help of respondent No.3 and got painted a writing on the shutter to the effect ‘As per proceedings of Collector A7/6015/2009 dated 06.10.2009 actual possession taken through Tahsildar, Warangal, Authorized Officer, UBI, Asset Recovery Branch, ………….’. According to the petitioner, inasmuch as he is in actual possession of the property and as his mercantile goods are still lying in the said premises, the action of the respondents in taking possession of the property is arbitrary and illegal. The learned counsel for the petitioner contends that the Supreme Court struck down the expression ‘free from encumbrances’ as appearing in Section 269 (UD) of the Income Tax Act in C.B. Gautam v. Union of India[2]. In view of the same, the learned counsel contends that the authorized officer delivering the property to the purchaser “free from encumbrances” has to be struck down since it affects the rights of the tenants of the premises. The provision under Section 269 (UD) of the Income Tax Act provides exercising the option by the appropriate authority for purchase of the property declared under Section 269 (UC) which prescribe the restrictions on transfer of immovable property. On exercising the option of the property under Section 269 (UD), the property vests in the Central Government free from all encumbrances on the date of such order passed by the Central Government. Therefore, under those circumstances, the tenant who is in possession of the property cannot vest in the Central Government “free from all encumbrances”. Therefore, when the said provision is challenged by the leasehold tenants who are having leasehold rights over the property, the Supreme Court struck down the above words ‘free from encumbrances”. But, that is not the case under the Security Interest (Enforcement) Rules, 2002 as interpreted by the learned counsel for the petitioner. Sub-rule (7) of Rule 9 of the Security Interest (Enforcement) Rules, 2002 envisages that where the immovable property sole is subject to any encumbrances, the authorized officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him. Sub-rule (8) of Rule 9 also envisages that ‘on such deposit of money for discharge of the encumbrances, the authorized officer may issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the payment accordingly.’ Sub-rule (9) of Rule 9 which is challenged as ultra vires reads thus: “9(9) the authorized officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub- rule (7) above.” So, an obligation is cast upon the authorized officer to deliver the property to the purchaser ‘free from encumbrances’, but the Rule does not stipulate that on delivery of the property to the purchaser, the property vests in him free from all encumbrances. Since it is the obligation of the authorized officer to deliver the property “free from encumbrances” to the purchaser, he can take steps to evict the tenant who is in possession of the property by issuing notice to the persons interested and only after following the due procedure for such eviction, he can deliver the property to the purchaser. Petitioner, if aggrieved by the action of the respondents in seizing the premises in question, he can always at liberty to move the appellate authority under Section 17 of the Act questioning the action of the respondents about the manner in which the possession was taken and can avail the remedies available to him. In view of the same, we see no merits in the writ petition. Accordingly, the writ petition is dismissed. No order as to costs. _________________ (A. GOPAL REDDY, J.) ______________ (K.C.BHANU, J.) OCTOBER 29, 2009 TSR [1] (2004) 4 SCC 311 [2] (1993) 1 SCC 78 "