The Supreme Court stated that a tenant in suspense is not entitled to any Rent Act protection from SARFAESI actions.
A "tenant at sufferance" is a tenant whose lease has expired but who has not yet moved out. The tenant is not entitled to possession of the secured asset for more than the period prescribed under the provisions of the Transfer of Property Act if the tenant only relies on an unregistered instrument or an oral agreement accompanied by delivery of possession in the absence of a registered instrument, the bench of Justices S. Abdul Nazeer and Krishna Murari observed.
In this case, the appellant claimed that he is a protected tenant under the Maharashtra Rent Control Act, 1999 and that he has been dwelling in the borrower's premises on the basis of an oral tenancy since 12 June 2012. The borrowers were sued under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The Magistrate denied the appellant's intervention application, concluding that he had not recorded a tenancy on record.
The court noted in its appeal that it was held in Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd., REED 2021 SC 08002 that if the tenancy claim is for a term longer than one year, the tenancy can only be made by a registered instrument. The bench noted in Bajarang Shyamsunder Agarwal v. Central Bank of India & Another, REED 2019 SC 09005: After considering almost all of this Court's decisions in relation to the right of a tenant in possession of the secured asset, a three-judge bench of this Court held in Bajarang Shyamsunder Agarwal v. Central Bank of India & Another, that if a valid tenancy under law exists even prior to the creation of the mortgage, such tenant's possession cannot be disturbed by the secured creditor by a mortgage. If a legal tenancy arises after the formation of a mortgage but before the issue of a notice under Section 13(2) of the SARFAESI Act, it must meet the requirements of Section 65A of the 1882 Transfer of Property Act. The execution of a registered document is required if a renter claims to be entitled to possession of a Secured Asset for a period of more than a year. In this Court's decision, it was clarified that, in the absence of a registered instrument, if the tenant relies solely on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under the Transfer of Property Act."
The court also stated that due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act, the Rent Act would not come to the aid of a "tenant in sufferance" in relation to the SARFAESI Act. The court stated in this case that there is considerable doubt about the tenant's bona fide because there is no good or sufficient evidence to establish the tenancy. The appellant claimed tenancy from June 12, 2012, until December 17, 2018. Any instrument that is registered does not support this. Furthermore, because the appellant is a "tenant in sufferance" he is not entitled to any of the Rent Act's protections. Second, even if the tenancy has been claimed to be renewed in accordance with Section 13(13) of the SARFAESI Act, the Borrower would be required to obtain the secured creditor's consent for any transfer of the Secured Asset, whether, by sale, lease, or otherwise, following the issuance of the notice under Section 13(2) of the SARFAESI Act, and admittedly, no such consent has been sought by the Borrower in the present case, the court said while dismissing the appeal.
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