How the Rent Con­trol Act pro­tects ten­ant rights

If a prop­erty owner de­faults on re­pay­ment of a loan, the lend­ing bank can­not have the ten­ant living there evicted if the rental lease has not ex­pired

HT Estates - - HTESTATES - Su­nil Tyagi

Alease en­ables the owner of a prop­erty (lessor/ land­lord) to grant the right of pos­ses­sion of prop­erty to his ten­ant (lessee). The ten­ant gets the right to en­joy the prop­erty for a spec­i­fied pe­riod of time on pay­ment of rent to the land­lord. Rent Con­trol Acts have been en­acted by dif f er­ent state l e gis­la­tures t o se­cure t he rights of the spe­cific class of ten­ants ( pro­tected ten­ants). The Rent Con­trol Act gov­erns the re­la­tion­ship be­tween a ten­ant and the land­lord and spec­i­fies the rights and li­a­bil­i­ties of each as well as the rules of eject­ment with re­spect to such ten­ants.

The pro­vi­sions of the Act re­strict the right of a land­lord to re­cover pos­ses­sion of his leased premises from a ten­ant. The lat­ter are also pro­tected against ar­bi­trary and un­rea­son­able evic­tion from the prop­erty.

How­ever, there have been in­stances of lessees be­ing is­sued no­tices by banks to va­cate the leased premises even be­fore the ex­piry of the term of the lease. This has hap­pened be­cause the leased premises were mort­gaged to banks as col­lat­eral se­cu­rity for money bor­rowed by the land­lord. The bank no­tices were is­sued after land­lords de­faulted on pay­ments. The banks had asked for han­dover of prop­erty under the rel­e­vant pro­vi­sions of The Se­cu­ri­ti­sa­tion and Re­con­struc­tion of Fi­nan­cial As­sets and En­force­ment of Se­cu­rity In­ter­est Act, 2002 (SARFAESI Act). In such cases, it is the un­sus­pect­ing ten­ant who suf­fers be­cause of the land­lord’s fault by be­ing evicted from the prop­erty be­cause of pos­ses­sion by the bank even though his lease for his prop­erty has not ex­pired.

In a re­cent case with the Supreme Court of In­dia (SC) an im­por­tant ques­tion was whether the pro­vi­sions of the SARFAESI Act could over­ride the pro­vi­sions of the Rent Con­trol Act and how the right of the ‘pro­tected ten­ant’ could be pro­tected if the land­lord takes a loan by of­fer­ing the very same prop­erty as se­cu­rity to the bank/ fi­nan­cial in­sti­tu­tion.

In this case, a loan was taken by some prop­erty own­ers from a par­tic­u­lar bank. A prop­erty which was leased to a ten­ant was also a part of the prop­er­ties which were mort­gaged to the bank as se­cu­rity against the loan. The land­lords failed to pay the dues within the stip­u­lated time and thus the bank ini­ti­ated pro­ceed­ings under the SARFAESI Act and got an or­der to take pos­ses­sion of the se­cured as­set. The ten­ant was is­sued a notice to evict the premises within 12 days of the re­ceipt of notice. The ten­ant fear­ing evic­tion filed a rent suit in the court of small causes. An in­terim or­der was passed in favour of the ten­ant and the land­lord was re­strained from ob­struct­ing the pos­ses­sion of the ten­ant over the premises dur­ing the pen­dency of suit. The ten­ant then filed an ap­pli­ca­tion to stay the ex­e­cu­tion of the or­der passed in favour of bank to take pos­ses­sion of the leased premises. This plea was, how­ever, dis­missed by the court which held that the or­der passed by court of small causes in favour of the ten­ant was not bind­ing on the bank. An ap­peal against this or­der was then filed by the ten­ant in the SC to pre­serve his pos­ses­sion of the leased prop­erty. The SC de­cided 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 the di­min­ish­ing the statu­tory rights of pro­tec­tion given to the ten­ant. In spite of the clause the SARFAESI Act can­not be used to bull­doze the statu­tory rights vested on the ten­ants under the Rent Con­trol Act.

The SC also re­fused to ac­cept the con­tention that the pro­vi­sions of SARFAESI Act over­ride the pro­vi­sions of the var­i­ous Rent Con­trol Acts to al­low a bank to evict a ten­ant from the ten­anted premise, which has be­come a se­cured as­set of the bank after the de­fault on loan by the land­lord. It said if the con­tention to dis­pense with the pro­ce­dure laid down under the pro­vi­sions of the var­i­ous Rent Con­trol Acts is ac­cepted, then the leg­isla­tive pow­ers of the state leg­is­la­tures are di­luted which would amount to un­der­min­ing the law en­acted by the state leg­is­la­ture. There­fore, the SC set aside the judg­ments passed against the ten­ant and al­lowed the ap­peal made by the ten­ant.

SHUT­TER­STOCK

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