Supreme Court dismisses appeal stating ‘If the tenancy claim is for any term exceeding 1 year, the tenancy can be made only by a registered instrument’

The Supreme Court in the case of Hemraj Ratnakar Salian vs. HDFC Bank Ltd and Ors has held that if a tenant claims that he is entitled to possession of a Secured Asset for a term of more than a year, it has to be supported by the execution of a registered instrument. If the tenant only relies upon 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 provisions of the Transfer of Property Act. HDFC Bank had granted financial facility to respondent nos.2 and 3 of Rs.5,50,00,000/- (Rs. Five Crore fifty lakh)­. On 3rd April, 2013, the Borrowers had mortgaged a property in Mumbai (the Secured Asset) in favour of the Bank with an intention to secure the said credit facility. The accounts of the Borrowers were declared as non-­performing assets (NPA) on 31st October, 2013. The Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) to the Borrowers. It is the case of the appellant that he is a tenant of the Secured Asset on a monthly rent of Rs. 20,000/-­ since 12th June, 2012 with an increase of 5% every year. He has been paying rent regularly to his landlord since the inception of his tenancy. The learned Judges stated that, 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 1 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 1 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. The appeal was dismissed by holding that, in the present case first of all there is a serious doubt as to the bonafide of the tenant, as there is no good or sufficient evidence to establish the tenancy of the appellant. According to the appellant, he is a tenant of the Secured Asset from 12th June, 2012. However, the documents produced in support of his claim are xerox copies of the rent. It is pertinent to note here that the Borrowers have not claimed that any tenant is staying at the Secured Asset. At the time of grant of facility, third-party valuers had also confirmed that the Borrowers were staying at the Secured Asset. Be that as it may. The appellant has pleaded tenancy from 12th June, 2012 to 17th December, 2018. This is not supported by any registered instrument.