The Delhi High Court has said that banks can’t evict a tenant using the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), a law that allows lending firms to auction properties when borrowers fail to repay loans.
The ruling is crucial at a time when cases are piling up in courts in Delhi where tenants allege that house owners are misusing the 2002 Act to circumvent the Delhi Rent Control Act, 1958 to evict old tenants who are occupying prime properties but pay paltry rent in areas such as Connaught Place, Gol Market, Daryaganj and Chandni Chowk. The Rent Control Act provides protection to tenants who are paying less than R3,500 from eviction.
“Right of a tenant protected by the Rent Act cannot be defeated and SARFAESI Act cannot be used for eviction,” a bench of justices Sanjay Kishan Kaul and Sanjeev Sachdeva said, giving relief to one Pradeep Chugh, a tenant evicted by State Bank of India. Chugh was paying R900 as rent for a house in Inderpuri.
“SARFAESI is being increasingly used by property owners to get their old tenants evicted with the help of banks. Owners take a loan by mortgaging property documents and deliberately default on payment. The bank then takes over the mortgaged property and evicts the tenant using the SARFAESI Act. When the property is put on auction, the original owner itself buys the property by putting up a dummy,” claimed Chugh’s lawyer Manjit Singh Ahluwalia.